In Excise Appeal No. 10028 of 2019 -CESTAT- Location of service provider & recipient irrelevant for availing CENVAT Credit, rules CESTAT (Ahmedabad)
Members Ramesh Nair (Judicial) & C.L. Mahar (Technical) [01-08-2023]

Read Order: C.C.E. & S.T.-Daman v. AGS Transact Technologies Ltd.

Chahat Varma

New Delhi, August 8, 2023: The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that the location of the service provider and recipient is irrelevant when it comes to availing CENVAT credit on input services and paying service tax on output services. The key factor is the utilization of input services for providing output services, regardless of where the services are provided and received.

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The central issue in this case revolved around the eligibility of AGS Transact Technologies Ltd. (respondent) to avail and utilize CENVAT credit on input services and capital goods at their Daman unit. The Revenue's argument was that the CENVAT credit claimed by the respondent at their Daman Factory, in relation to input services and capital goods, lacked a direct or indirect connection with the excisable goods produced at the same unit. As a result, the Revenue contended that the respondent was not entitled to the disputed CENVAT credit.

The bench of Ramesh Nair (Judicial) and C.L. Mahar (Technical) referred to Rule 3 of the CENVAT Credit Rules, 2004, noting that the credit for excise duty paid on input or capital goods, as well as the service tax paid on input services, is collectively termed as ‘CENVAT credit’. This credit is open for both manufacturers and service providers, and it can be utilized for the payment of either excise duty or service tax. The provisions of these rules do not explicitly mandate the requirement for manufacturers and service providers to maintain separate accounts for availing and utilizing CENVAT credit. As such, the absence of any such restriction or prohibition implies that the assessee has the freedom to maintain a consolidated Cenvat account and use it for discharging both excise duty and service tax obligations.

The bench further emphasized that since the respondent operates both as a manufacturer and a provider of output services from their Daman factory during the contested period, they have the eligibility to avail CENVAT credit on input, capital goods, and input services used for furnishing output services. This entitlement arises from their centralized service tax registration at the Daman factory, which encompasses both manufactured goods and provided output services. Additionally, the bench highlighted that CENVAT is a beneficial piece of legislation, aimed at conferring benefits and rectifying cascading effects. Therefore, the rejection of credit based on procedural irregularities is untenable in light of the legislative intent behind CENVAT.

The bench affirmed its agreement with the respondent's argument, highlighting that Rule 2(l) of the CENVAT Credit Rules, does not impose any limitation on the receipt and utilization of input services solely within the premises or factory of the output service provider. Consequently, the bench concluded that the Learned Commissioner correctly sanctioned the CENVAT credit to the respondent in the present case.