Case Law Details
Ifb Industries Limited Vs C.S.T. (CESTAT Ahmedabad)
Introduction: In a significant decision by CESTAT Ahmedabad, IFB Industries Limited successfully won their appeal against the denial of CENVAT credit. This judgement illustrates a vital aspect of the CENVAT credit rules regarding the eligibility of service providers in availing CENVAT credit for the discharge of service tax on output services of repair and maintenance of equipment.
Analysis: The appellant, a branch of IFB Industries Limited, had been paying service tax for providing repair and maintenance service to their customers. In addition, they were also availing CENVAT credit for various expenditures incurred for providing this output service, including advertisement expenses, telephone bills, bank charges, insurance, and more. However, the lower authorities denied this CENVAT credit based on the ground that since the appellant’s service unit is part of their Goa unit, they could not operate separately as an independent service provider, and hence, they couldn’t avail the CENVAT credit.
The ruling by CESTAT Ahmedabad contested this view. They pointed out that as the department had accepted the payment of service tax on their output service, denying the CENVAT credit on the input services, used for providing the output service, was unjustified. As a result, CESTAT Ahmedabad acknowledged that the appellant was entitled to the CENVAT credit amount of Rs. 4,06,163.
Conclusion: This case serves as a significant precedent for similar disputes revolving around the eligibility for availing CENVAT credit. It underscores that if a service provider is discharging service tax on the output service, they should not be denied the CENVAT credit on the input services that are used to provide the said output service.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal is directed against Order-In-Appeal dated 31.05.2013 whereby Commissioner (Appeals) upheld the demand of Cenvat Credit of Rs. 4, 06,163/- and corresponding interest and penalty. The appellant being aggrieved with the said impugned order filed the present appeal.
2. Shri Pulak Kumar Saha, Learned Chartered Accountant appearing on behalf of the appellant submits that the appellant is a branch of IFB Industries Limited. Through this branch the appellant are providing the repair & maintenance service to the individual customer of IFB Industries Limited on which they are paying service tax, they are also availing cenvat credit and various expenditures incurred in respect of Advertisement expense, Telephone bills, Bank charges, Insurance etc. These services were used for providing output service, therefore, the cenvat credit is rightly availed by the appellant. The lower authorities have denied the cenvat credit only on the ground that since the appellant’s service unit is part of their Goa unit, therefore, they cannot separately operate as independent service provider. Hence, the cenvat credit cannot be availed.
2.1 He submits that as regard the payment of service tax by the appellant branch is not under dispute therefore, the credit should not be denied.
3. Shri Ajay Kumar Samota, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. I have carefully considered the submissions made by both sides and perused the records. I find that even though the appellant service tax registration is on the common PAN based but the appellant have taken separate registration for their Ahmedabad service branch. They are also discharging service tax on the output service of repair and maintenance of equipment and appliances of IFB Industries Limited. Therefore, once the department has accepted the payment of service tax on their output service, the cenvat credit cannot be denied on the input services which are used for providing output service. Accordingly, in my considered view, the appellant is entitled for the cenvat credit amount of Rs. 4,06,163/.
5. Hence, the demand of such cenvat credit and corresponding interest and penalty are set aside. Appeal is allowed in above terms.
(Pronounced in the open court 28.07.2023)
