The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that Cenvat credit cannot be denied at the recipient’s end when service tax has been paid and accepted at the provider’s end.
SKF Technologies Pvt. Limited, the appellant, is a subsidiary of AB SKF Sweden, engaged in the manufacturing sector. The appellant, along with SKF India Ltd. (another subsidiary of AB SKF Sweden), entered into a cost-sharing agreement to pool resources such as manpower, business development, and taxation services to achieve operational efficiencies.
Invoices were raised by SKF India Ltd. on SKF Technologies Pvt. Ltd., with service tax duly paid on the amount transferred. The department issued nine show cause notices ( SCNs ) covering the period from April 2008 to September 2013, alleging that the credit did not have a nexus with output services and was availed on ineligible documents, including invoices not in the appellant’s name or photocopies.
The Commissioner issued an Order-in-Original dated 09.12.2019, disallowing Cenvat credit of Rs. 1,63,49,705 on Business Support Services. On appeal, the appellant’s counsel argued that the SCNs had only alleged a lack of nexus with output services, but the adjudication order expanded the scope by denying credit based on procedural issues like document validity.
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The revenue countered that the onus was on the appellant to prove that the impugned services were eligible for Cenvat credit and were taken based on valid documents. The department argued merely reallocating costs and not providing taxable services, rendering the credit ineligible.
The two-member bench comprising Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) observed that service tax had been duly paid by SKF India Ltd., and the department had accepted the tax without dispute.
The tribunal observed no objections had been raised during prior tax assessments, and similar transactions had been assessed without issue. The tribunal referenced Amara Raja Electronics Ltd. (2016), Nahar Granites Ltd. (2014), and Creative Enterprises (2009) which held that credit cannot be denied at the recipient’s end when tax is collected at the provider’s end.
The tribunal ruled that the denial of credit was unjustified and set aside the impugned order. The tribunal held that Cenvat credit of Rs. 1,63,49,705 on Business Support Services was allowed in favor of the appellant.
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