CENVAT Credit Cannot Be Denied If Service Tax Is Paid and Accepted: CESTAT Remands All Nippon Airways’s Case for Verification [Read Order]

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) held that CENVAT credit cannot be denied if service tax has been paid and accepted by the Revenue, even if it does not qualify as a taxable service. The Tribunal remanded the matter for verification of service tax payments of five interconnected appeals filed by All Nippon Airways Co. Ltd.

The appellant, a Japanese airline operating passenger flights between India and Japan, was issued multiple show cause notices between 2013 and 2017. These notices proposed the denial of CENVAT credit availed on service tax paid on input services associated with Passenger Service Fee (PSF), Development Fee (DF), and User Development Fee (UDF), collected from passengers.

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The Revenue contended that the services, such as those related to PSF, DF, and UDF, were provided by airport operators like the Airports Authority of India and Mumbai International Airport Pvt. Ltd., and not by the airline. As a result, it was alleged that the airline was not eligible to take CENVAT credit on input services used in respect of those charges.

The first show cause notice, dated April 23, 2013, covered the period from April 2007 to March 2012, demanding CENVAT credit of ₹4.91 lakh. Subsequent notices covered periods up to March 2016, with the total disputed credit amounting to over ₹6.82 crore.

The appellant argued by relying on the judgment of the Bombay High Court in Commissioner of Central Excise, Pune v. Ajinkya Enterprises (2012), the appellant contended even if someone has involved in any activity which does not amount to provision of service, still, if the service tax paid on such activity is accepted by Revenue then CENVAT credit of service tax paid on input services going into such activity cannot be denied.

The Tribunal, comprising Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member), held that even if an activity does not amount to the provision of service, CENVAT credit on input services cannot be denied if service tax paid on the activity is accepted by the Revenue.

However, the Tribunal observed that the records before it did not contain sufficient details to verify whether the service tax paid by the airline during the relevant period was equal to or more than the CENVAT credit claimed. Accordingly, the matter was remanded to the original adjudicating authority with directions to verify the tax payment details and decide the matter afresh.

All five appeals were allowed for remand.

The appellant was represented by Mahir Chablani, with Renuka Sable. The Revenue was represented by C.S. Pavan.

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