CENVAT credit of Service Tax Allowable to Management Consultancy Services covered u/r 6(5) of CCR: CESTAT [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the management consultancy service was covered by rule 6(5) of the CENVAT Credit Rules (CCR),2004 which was permitted to avail 100% of CENVAT Credit of Service Tax. 

Sabic Innovative Plastics India Pvt Ltd, the appellant assessee was receiving management consultancy service and other services and in respect of all other services, the assessee was reversing the CENVAT credit in proportion to the exempted services provided by them in terms of Rule 6 of CENVAT Credit Rules and the Management Consultancy Service the assessee was not reversing the proportionate credit in respect of exempted services provided by them. 

The assessee appealed against the order passed by the adjudicating authority against the demand for reversal of CENVAT credit in respect of the services under the head of Management Consultancy Service received by the assessee from a foreign person. 

Rajan Mishra, the counsel for the assessee contended that the Management Consultancy Service was covered by Rule 6(5) of CENVAT Credit Rules which permitted them to avail 100% CENVAT credit. 

Also submitted that before 01.04.2011, the so-called exempted service, i.e. “Trading Activity” was neither considered as manufacturing activity nor as the provision of taxable service and irrespective of the above fact at the material time Rule 6(5) permitted them to avail 100% credit of CENVAT in respect of specified services, including Management Consultancy Service in notwithstanding the Provisions of Rule 6(1), Rule 6(2) and Rule 6(3) of CCR. 

Tara Prakash, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was not entitled to avail the CENVAT credit of service provided by them. 

The Bench observed that Since rule 6(5) of the CENVAT Credit Rules excludes the credit availed on Management Consultancy Service from the application of Rules 6(1), 6(2), and 6(3) of CCR, no reversal of CENVAT credit was required. 

The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the demand for reversal of CENVAT credit while allowing the appeal filed by the assessee. 

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