Cenvat credit availed on the invoices received prior to Service tax registration cannot be denied

[Bimal jain]

Dear Professional Colleague,

Cenvat credit availed on the invoices received prior to Service tax registration cannot be denied

We are sharing with you an important judgment of Hon’ble CESTAT, New Delhi, in the case of JP. Kenny Ltd. Vs. CCE. and CST. - Delhi [2015 (1) TMI 1199 - CESTAT NEW DELHI] on the following issue:

Issue:

Whether the Cenvat credit availed on the invoices received prior to Service tax registration can be denied?

Facts and background:

In the instant case, JP. Kenny Ltd. (“the Appellant”) availed Cenvat credit of ₹ 6,48,208/- on the invoices received prior to their Service tax registration and also availed Cenvat credit of ₹ 47,182/- on Housekeeping and Hotel services charges paid by them.

The Department denied the said Cenvat credit to the Appellant on the ground that the Appellant is not entitled to take Cenvat credit on services received prior to Service tax registration and that the Housekeeping and Hotel services charges are not related to Appellant’s business of manufacturing as these services have been availed outside the factory premises.

Thereafter, the matter was adjudicated and demand was confirmed against the Appellant along with interest and penalties. Being aggrieved, the Appellant preferred an appeal before the Hon’ble CESTAT, Delhi.

The Appellant relying upon the decision in the case of MPortal India Wireless Solutions Pvt. Ltd Vs. CST [2011 (9) TMI 450 - KARNATAKA HIGH COURT] (“MPortal India case”) which was followed by the Hon’ble Tribunal in the case of Reliance Ports and Terminals Ltd. Vs. C.C.E. [2015 (2) TMI 438 - CESTAT AHMEDABAD], submitted that Cenvat credit cannot be denied for the invoices received prior to Service tax registration.

Further in respect of Cenvat credit availed on the Housekeeping charges, the Appellant submitted that the same is governed by the decision in the case of LO real India Pvt. Ltd Vs. C.C.E. Pune [2010 (11) TMI 143 - CESTAT, MUMBAI]. However, for Hotel charges, the Appellant fairly conceded that they are not entitled to take Cenvat credit for the same but submitted that the demand is time barred as the facts of availment of Cenvat credit came to the knowledge of the Department at the time of audit.

On the other hand, the Department placed reliance on the decision in the case of Showa India (P) Ltd. Vs. C.C.E. Faridabad [2011 (7) TMI 909 - CESTAT, DELHI] and submitted that prior to Service tax registration, the Appellant is not entitled to take Cenvat credit. Whereas in respect of services of Housekeeping and Hotel charges, it was submitted that these services are availed by individual in residential colony. Therefore, the Appellant is not entitled to take Cenvat credit of the same. On ground of limitation, the Department submitted that as the fact of availment of Cenvat credit came to the knowledge of the Department during the course of the audit and the Appellant has not taken any positive steps to pay inadmissible Cenvat credit within time, therefore, extended period of limitation is rightly invoked.

Held:

The Hon’ble CESTAT, Delhi relying upon the decision in the MPortal India case, held that the matter is squarely covered in aforesaid decision and therefore, the Appellant is entitled to take Cenvat credit on the invoices received prior to Service tax registration. As regards the issue of inadmissible Cenvat credit, the allegations of the Department were upheld and the corresponding demand was confirmed along with interest.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

Delhi:

Flat No. 34B, Ground Floor, Pocket - 1,

Mayur Vihar, Phase - I,

Delhi - 110091, India

Desktel: +91-11-22757595/ 42427056

Mobile: +91 9810604563

Chandigarh:

H. No. 908, Sector 12-A,

Panchkula, Haryana - 134115

Kolkata:

Ist Floor, 10 R G Kar Road

Shyambazar, Kolkata - 700 004

Email: bimaljain@hotmail.com

Web: www.a2ztaxcorp.com

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.