Payment of Service Tax gives Right to Claim Cenvat Credit on Input Services: CESTAT [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the payment of service tax gives the right to claim cenvat credit on input services.

The present appeal is directed against the impugned order passed by the Commissioner of Central Excise, Rohtak whereby the demand to the tune of Rs. 84,71,295/- was confirmed under the provision 73 (1) of the Finance Act, 1994 and also imposed equivalent penalties under Section 78 of the Finance Act, 1994.

A show cause notice was issued to the appellant, Chanakya Communication Network Pvt. Ltd, demanding Rs 84,71,295/ wrongly availed and utilized by them under Rule 14 of the Cenvat Credit Rules 2004 (CCR) read with section 73 of the finance Act, 1994 by invoking the proviso to the said section along with interest and penalty.

The Commissioner has confirmed the demand for recovery of irregularly availed Cenvat Credit under Rule 14 of the Cenvat Credit Rules, 2004 read with section 73 of the Finance Act, 1994 along with interest and also imposed equivalent penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act.

Rule 2(1) of Cenvat credit Rules, 2004 which defines input service as any service used by a provider of output service for providing an output service.

The Counsel for the appellant submitted that the broadcasting service were utilised by the Appellant for rendering the Business Auxiliary Services (BAS) to M/s Wire and Wireless (India) Ltd (WWIL) as service provider and once the services have been utilised by the service provider in furtherance of fulfilling the obligations for rendering the output service, the credit pertaining to the same cannot be denied.

A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “The agreements entered with the broadcasting agencies were not on behalf of WWIL, but on its own behalf by the appellant. Further, perusal of the invoices issued by the broadcasting agencies to the appellant on which the appellant has paid the service tax gives him a right to claim the cenvat credit on input services.”

The Tribunal also noted that the appellant has been filing the ST-returns with full disclosure of the cenvat credit amount availed on the services and the department was already aware of the fact about the availment of cenvat credit of tax paid on broadcasting services.

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