Location from where Service is Provided and Received is Immaterial for Availing Cenvat Credit on Input Services for Payment of Service Tax: CESTAT [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the location from where service is provided and received is immaterial for availing Cenvat credit on input services for payment of service tax.

The respondent, Ags Transact Technologies Ltd, is engaged in the manufacture of Automatic Teller Machines (ATMs), other office Machines, Pumps of Liquids etc., falling under Chapter 84 of Central Excise Tariff Act 1985 and availing the benefits under the CENVAT Credit Rules, 2004.

On scrutiny of the ER-1 return filed by the respondent for the month of March 2014, it was noticed by the revenue that there was a sudden spurt in the availment of Cenvat Credit by the respondent particularly in reference to credit of service tax claimed to be input service.

While the credit of the duties paid on the goods and tax paid on the input services consumed by them at their different service locations all over the India were admissible to them as provider of output service subject to the conditions thereof and the same was to be reflected by them in their ST-3 returns, however, in respect of their manufacturing unit, the credit of the duties paid on the goods and tax on the services consumed in or in relation to the manufacturing activity alone was admissible to be reflected in their ER-1 return.

Both the show cause notices have been decided by the impugned Common Order-In-Original. The Adjudicating authority has dropped the proceedings initiated against the respondent vide above show cause notices. Being aggrieved by the said impugned order the revenue filed the present appeal.

The Counsel appearing on behalf of the revenue contended that Rule 3(1) of the Cenvat Credit Rules 2004 clearly requires, in cases of both input and capital goods, as well as, in the cases of input services, that such inputs or capital goods and input services are required to be received by the manufacturer at factory premises and used in the manufacture of final products. The Commissioner’s findings to the effect that there is no restriction of input services to be received in the factory or premises of output service provider is clearly erroneous.

The Counsel appearing for the respondent contended that a person who manufactures goods as well as provides services is entitled to avail Cenvat Credit on inputs, input services and capital goods used in both its activities and accumulate the credit in a common pool. The said credit lying in the common pool can be utilized to pay the excise duty and/or the service tax. In other words, one –to-one correlation/nexus between the credit utilized and the duty/ tax paid is not required to be made.

A Two-Member Bench of the Tribunal comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member held that “The location from where the service is provided and received is immaterial for availing the Cenvat credit on input services as well as for payment of service tax on the output services. We also agree with argument of respondent that there is no restriction in Rule 2(l) of Cenvat Credit Rules, 2004 in respect of the input service to be received and utilized only in the factory or premises of the output service provider.”

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