CA Manoj Nahata 
Availment of Cenvat Credit for the prior period has always been a disputed matter. Over and above that, availment of Cenvat Credit for the period prior to registration under service tax law has created one more new dispute. The tax dept. always denied the claim on the ground that during the disputed period the assessee has not provided or received taxable service as they were not registered with the Department. Time and again this matter was challenged before different forums and in many cases decided in favour of the assessee.
Summary of the Judgement:
Recently, the Hon’ble CESTAT Ahmedabad Bench is case of Effective Teleservices (P.) Ltd. Vs. Commissioner of Central Excise, Ahmedabad -III [2013] 38 taxmann.com 94 (Ahmedabad – CESTAT) has an occasion to deal with similar issue. It was held by the Tribunal that an assessee may take credit even prior to registration, but, if he chooses to take credit after registration, such credit cannot be disallowed as belated. Credit can be taken at any time and, therefore, credit availed after registration was in order. In order to understand this judgment let us first know the exact position of law in this regard.
Position of Law:
Under the Cenvat Credit Rules, 2004 an assessee is entitled to avail the credit of Input Services. Rule 3 of CENVAT credit Rules, 2004 allows a service provider to avail CENVAT credit of service tax paid on input services against the payment of service tax with the Central Government as prescribed in the rules. Further rule 4 of the Service Tax Rules requires a provider of output service is to register with the Central Excise department within a period of 30 days from the date on which the service tax is levied. Rule 4(1) of Cenvat Credit Rule state that CENVAT may be taken immediately on receipt of inputs in the factory or the premises of service provider.
Now, the question which arises is whether the service tax paid on input service prior to service tax registration is eligible for an assessee?
Facts of the case:
The appellant has availed Cenvat credit of Rs. 3,03,998/- in the month of 2008. It was noticed by the lower authorities that the assessee has got himself registered on 21.4.2006 while the credit availed by them in September 2008 was in respect of the input services received by them prior to the date of registration and the said credit was not availed immediately on receipt of the input services. Coming to such a conclusion, the demand along with interest and penalty was confirmed and even the first appellate authority also upheld the order passed by the adjudicating authority. Thus the issue to be decided by the tribunal is whether the appellant is eligible to avail the Cenvat credit for the services received by him from 01.9.2004 to 31.3.2006. The said credit which has been availed by the appellant was on 28.8.2008, after the rejection of the refund claim filed by them.
Detailed Judgment:
While deciding this case the Hon’ble tribunal in its finding held that the judgment delivered by the same Bench in the case of C. Metric Solution (P.) Ltd. v. CCE [2013] 39 STT 313/31 taxmann.com 344 (Ahd. – CESTAT) is on the issue and covers the case of the appellant in his favour.
In case of C. Metric Solution (P.) Ltd. v. CCE, the appellant had availed CENVAT credit of the service tax paid on input services during the period April 2008 to March 2009, after getting the service tax registration on 23.03.2009. The Department was of the view that the appellant is not eligible for CENVAT credit on the input services for the period prior to the registration granted to the appellant. The Department confirmed the demand which was also upheld by the first Appellate Authority. Before the Tribunal the appellant contended that the appellant is a Software Technology Park Unit (STP) which is not disputed by the Department. The appellant is exporting software manufactured by them. After getting the registration they have availed the CENVAT credit. The CENVAT credit was denied to them only on technical ground. The appellant relied on two judgments which are given below:
- J.R. Herbal Care India Limited V. Commissioner of Central Excise, Noida’ – 2010 (3) TMI 391 – CESTAT, NEW DELHI
- Well known polyesters Limited V. Commissioner of Central Excise, Vapi’ – 2011 (1) TMI 664 – CESTAT, AHMEDABAD
In J.R. Herbal’s case the appellant had received the capital goods while availing SSI exemption without taking registration. Cenvat credit was taken on the capital goods for the years 2003-04 and 2004-05 but taken in the year 2005-06. This was allowed by the Tribunal. The Tribunal took a view that there is no provision in the rules that credit was not available to unregistered manufacturers. Manufacturers exempted from the registration do not cease to be a manufacturer of excisable goods. This case squarely covers the issue in this case also. Therefore, in respect of the goods manufactured during the period when the appellant was not registered, credit can be taken subsequently also. This view is further supported by the consistent stand taken by various judicial forums in the case of clandestine removals, even if the duty is paid subsequently, Cenvat credit on inputs used will be available to the assessee/manufacturer subject to the conditions that proper documents showing the payment of duty are available. In the case of SSI Units also, wherever SSI benefits have been denied, Cenvat credit has been allowed.
It can be seen from the above reproduced ratio of the Division Bench decision that the appellant is eligible to avail Cenvat credit of the service tax paid on input services after getting registration. In this case, it is recorded that the appellant has shown or recorded the service tax paid on input services in a register which is considered as a Cenvat account.
Author’s comment:
Though the rule 4(1) of Cenvat Credit Rule prescribed that CENVAT may be taken immediately on receipt of inputs in the factory or the premises of service provider. Department has clarified that ‘immediately’ means the earliest opportunity when the inputs are received. However, this does not mean that if manufacturer/service provider does not take credit as soon as inputs are received in the factory/premises of service provider, he would be denied benefit of CENVAT credit. Such an interpretation is not tenable. Immediately does not mean within 24 hours. It is not necessary to take credit as soon as inputs are received in the factory. However, manufacturer/service provider should take credit at earliest opportunity. In author’s opinion the word ‘may’ cannot be read as ‘must’.
It is a settled legal position that that when a statute does not prescribed any time limit for any action, no time limit can be imputed into that statute from any other provision. Hence, there is no time limit for taking CENVAT credit. Industrial Cables v CCE (2009 (1) TMI 281 – HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH)= (2009) 236 ELT 658 (P&H – DB).
Unlike VAT law there is no such requirement under the service tax law that the Cenvatable invoice must bear the registration number of the service receiver. This also makes the assessee’s position strong enough that in absence of requirement of registration number in the invoice the Cenvat credit even for the period prior to registration can be taken. But at the same time the author is of the view that the judgments should not be applied in a blanket manner in all the cases .There should be proper records maintained as prescribed under the Cenvat credit rules and further the unclaimed/unavailed input should clearly appear in the books and records of the assessee.
*The author is a practicing chartered accountant at Guwahati can be reached at: manoj_nahata2003@yahoo.co.in
