Tribunal allows Cenvat credit pre-registration, emphasizes fairness

The Tribunal ruled in favor of the service provider, allowing the Cenvat credit for services provided before their registration under the Service Tax Rules, 1994. The Tribunal emphasized that denial of credit would be unfair given the circumstances, as the service tax was effective from the date of introduction, and registration within 30 days was a procedural requirement. The Tribunal acknowledged the benefit of Cenvat credit under Rule 3 and waived the recovery of the disallowed amount, staying the recovery until the appeal was resolved.

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Issues:
1. Denial of Cenvat credit for services provided before registration under Service Tax Rules, 1994.

Analysis:
The case involved a service provider of 'Information Technology Software Services' who registered themselves under the service tax net on 18.06.2008, after the service tax was introduced on 16.05.2008. The applicant exported services and sought a refund under Rule 5 of the CENVAT Credit Rules. The Commissioner disallowed a portion of the refund, citing that it related to credit taken before registration, and ordered recovery of the disallowed amount. The applicant argued that since the service tax was payable from the date of introduction, the credit of input services should also be available from that date, and registration within 30 days was a procedural requirement. The applicant relied on the substantial benefit of Cenvat credit under Rule 3, emphasizing that denial of credit would be unfair given the circumstances.

The opposing party contended that credit cannot be claimed before registration, referring to a Tribunal's decision in a similar case. The Tribunal, after considering the arguments and records, acknowledged that the service tax on the applicant's output service was effective from 16.05.2008, and registration within 30 days was permitted by the rules. Recognizing that it would be incorrect to deny credit on input services used from the effective date of service tax, the Tribunal found in favor of the applicant. The Tribunal noted that the original authority had already sanctioned the refund and, therefore, deemed it appropriate to waive the pre-deposit of the amount ordered to be recovered by the Commissioner's decision, staying the recovery until the appeal was disposed of. The judgment was pronounced and dictated in open court by M Veeraiyan.

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