2024 (1) TMI 778 - AT - Service Tax

CENVAT Credit - input services - input services were received by them prior to their obtaining registration and commencing of output service - Rule 2(l) of the Cenvat Credit Rules, 2004 - period November 2012 - HELD THAT - The principle is that any service taken for providing output service is input service if such service is used by a provider of output service. The statutory provisions governing the Service Tax nowhere provides the time limit for utilisation of the input services nor does it require any one-to-one co-relation that input service availed in any particular month should be utilised when the assessee provides output service. The Revenue is required to take a practical approach that the process for providing output service takes time and it is essential on the part of the appellant to make proper arrangements so that output service can be provided without interruption. The period prior to providing the output services and billing its members for output services, the appellant incurred expenditure from April, 2012 to October, 2012 which were essential and used for providing output services. The Authorities below have held that the appellant is ineligible to avail Cenvat Credit of input service on the services which were used prior to registration. The issue is no longer res-integra as the same stands concluded in the earlier decision in JINDAL STEEL POWER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIPUR 2008 (4) TMI 176 - CESTAT, NEW DELHI where it was held that Thus the utilisation of credit was permissible in view of the extended definition of output service and in view of the fact they also started rendering output services. The appellant is entitle to claim the Cenvat Credit and therefore, the issue of any interest and penalty does not arise - the Appellate Authority has passed the impugned order without application of mind as the impugned order is verbatim of the Order-in-Original and needs to be set aside on this ground itself - the impugned order is set aside and the appeal stands allowed.

Summary

Issues:
The judgment deals with the eligibility of the appellant for Cenvat Credit on input services under Rule 2(l) of the Cenvat Credit Rules, 2004 for the period November 2012, considering the input services were received before obtaining registration and commencing output service.

Comprehensive Details:

Issue 1: Eligibility for Cenvat Credit
The appellant challenged the Order-in-Appeal confirming disallowance of Cenvat Credit on input services used before registration. The appellant availed credit of input services from April to October 2012 for providing output services in November 2012. The show cause notice was issued for disallowance of credit, which was affirmed in the Order-in-Original. The appellant contended that Rule 2(l) and 3(4) of the Cenvat Credit Rules do not restrict availing credit on input services used before output services. The Revenue argued that services used before registration do not qualify as "input service" under Rule 2(l).

Issue 2: Interpretation of Input Service
The Tribunal found that the services used by the appellant fall within the definition of "input service." The dispute centered on taking input services before providing output services and registration. The Tribunal noted that there is no time limit prescribed for utilizing input services and no requirement for one-to-one correlation between availing input services and providing output services. The Tribunal agreed that the period before providing output services involved essential expenditure used for output services.

Issue 3: Precedents and Legal Interpretation
The Tribunal cited precedents like Jindal Steel & Power Ltd. and Imagination Technologies India P. Ltd. to support the appellant's claim for Cenvat Credit on input services used before registration. The Tribunal also referenced Mafatlal Industries Ltd., highlighting that denial of credit for ISD invoices issued before registration is not supported by law. The Tribunal concluded that the appellant is entitled to claim Cenvat Credit, setting aside the demand and penalties. The Tribunal criticized the Appellate Authority for passing the impugned order without proper consideration, setting it aside and allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the Cenvat Credit claim and setting aside the impugned order due to lack of proper application of mind.