Cenvat credit on inputs/ input services received by an output service provider prior to obtaining Service tax registration is admissible

Actis Advisers Pvt. Ltd. Vs. CST. -Delhi-IV [(2014) 9 TMI 182 - CESTAT New Delhi]

Actis Advisers Pvt. Ltd. (“the Appellant”) is engaged in providing ‘Management Consultancy Services’ (“output service”) mainly to their overseas clients. Earlier, the Appellant’s Bombay branch had Service tax registration and subsequently when the  Delhi branch started operating, they obtained Centralised registration. For some period, there was no separate registration  till the      Centralized    registration     was obtained in respect of Delhi branch.

The Appellant availed Cenvat credit in respect of various input services used for providing their output service. Since they could not utilize the accumulated Cenvat Credit in respect of input services for  payment of Service tax on their domestic transactions, in accordance with the Provisions of Rule 5 of the Cenvat Credit Rules, 2004 read with Notification No. 5/2006-CE (NT) dated March 14, 2006, they filed claims for cash refund of Rs. 32,54,141/- of the accumulated Cenvat Credit for October, 2009 to December, 2009 quarter and another refund claim for an amount of Rs. 12,20,506/- for January, 2010 to March, 2010 quarter.

The Jurisdictional Assistant Commissioner by two separate orders sanctioned refund of Rs. 11,89,402/- out of claimed amount of Rs. 12,20,506/- and sanctioned refund of Rs. 32,54,077/- out of the claimed amount of Rs. 32,54,141/-. However, in both the cases the Assistant Commissioner ordered adjustment of interest on wrongly availed Cenvat credit which was to be adjusted against the refund claims. The interest was charged on the ground that certain amount of Cenvat credit has been taken on the basis of the service provider’s invoices, while during that period the Appellant did not have Service tax registration and that they became eligible for Cenvat credit on the basis of those invoice only on the date the Delhi office of the Appellant obtained Centralized registration. The Department alleged that unless an assessee has Service tax or Central Excise registration, he would not be eligible for Cenvat credit in respect of input services or inputs received during the relevant period.

On appeals being filed to Commissioner (Appeals), the same were dismissed. Against the orders of Commissioner (Appeals), the Appellant preferred an appeal to the Hon’ble CESTAT, Delhi. The Appellant relied upon the decision in the case of C. Metric Solution Pvt. Ltd. Vs. CCE,  Ahmadabad [2012(28)  STR-460  (Tri.Ah md.)] (“The      Metric    Solution case”) and Well Known Polyesters Ltd. Vs. CCE [2012(25)  STR-411 (Tri. Ahmd.)] and pleaded that when  there is no       dispute about receipt of the input services in respect of which Cenvat credit has been taken, then Cenvat Credit cannot be denied merely because the Appellant had not taken Centralized  Registration at Delhi  for the period when the service were received.

The Hon’ble CESTAT, Delhi also relied upon the decision in the Metric Solution case and held that Cenvat credit in respect of inputs4f input services received by an output service provider during the period prior to his obtaining Service tax registration is admissible and denial of Cenvat Credit on this ground is not correct.