Cenvat Credit: Classification of Service cannot be challenged at the recipient’s End, says CESTAT [Read Order]

In the case of Gulf Oil Corporation, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that the Classification of service for availing cenvat credit cannot be challenged at the recipient’s end.

During the course of the audit conducted by the Central Excise Department, it was noticed by the audit party that the appellant has availed credit of Rs.1905500/- on the invoice issued by M/s. K.P.H. Dream Cricket Pvt. Ltd. (KPH) for promotion of the product of the appellant such as logo, trademark, and products manufactured by the appellant. The service provider M/s. KPH has discharged the service tax and issued the invoice. 

It was argued by the department that the service is correctly classifiable under Sponsorship Service according to which the service recipient is required to pay the service tax in terms of Rule 2(1)(d)(iv) of Service Tax Rules, 1994 therefore,  the service tax under the head of Business Auxiliary Service by the service provider is incorrect and consequentially the appellant is not entitled to the cenvat credit.

It was submitted by the appellant that since the service provider has paid the service tax under Business Auxiliary Service and the same has not been challenged by the department neither classification can be disputed at the recipient end nor the cenvat can be denied on the charge that due to service classifiable under Sponsorship Service, since the appellant is liable to pay the service tax, credit is not available.

A Coram comprising of Mr Ramesh Nair, Member (Judicial) and Mr Raju, Member (Technical) observed that the dispute was the same and that the service falls under Sponsorship Service.In the case of COCA-COLA INDIA PVT. LTD., it was held that at the recipient’s end, the classification cannot be changed.

In light of the said judgment, the Tribunal observed that since the classification of service cannot be challenged at the recipient’s end, the cenvat credit availed by them cannot be disputed. While allowing the appeal, the impugned order is set aside.

To Read the full text of the Order CLICK HERE

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