2013 (4) TMI 70 - AT - Service Tax

Tribunal grants Cenvat credit on imported machines, emphasizing accurate records and rejecting penalties.

Global Digital Color Lab Versus Commissioner of Central Excise I, Jaipur-I

The Tribunal allowed the appeals and rejected the Revenue's denial of Cenvat credit, interest, and penalty. It held that there was no legal basis to ... Availment of credit before getting registration certificate as service provider - Revenue made out that the appellant could not have taken Cenvat credit of countervailing duty paid on machines imported prior to the date on which service tax registration was granted on such reasoning denying Cenvat credit along with interest and penalty. – Held that - There is nothing in the rules prohibiting a person from maintaining proper account. There is no statutory record presently prescribed like 'RG-23' as was earlier in force. The business records maintained correctly reflecting the position has to be accepted. - credit allowed - decided in favor of assessee. Issues:1. Cenvat credit on imported machines taken before service tax registration granted.2. Denial of Cenvat credit, interest, and penalty by Revenue.Issue 1: Cenvat credit on imported machines taken before service tax registration granted.The appellant, setting up a colour photo lab, imported machines in December 2005 and January 2006, before receiving service tax registration. They applied for registration before machine receipt and obtained it on 2.1.2006. The first appeal concerns the credit taken before registration, while the second appeal involves the balance 50% credit taken in the next financial year.The Revenue contended that Cenvat credit on imported machines cannot be taken before service tax registration. Lower authorities upheld this, initiating proceedings for denying credit, interest, and penalty.The appellant argued that service tax registration was required only when ready to provide service, necessitating machine procurement. Cenvat credit rules do not specify a time limit for credit after machine procurement. They took credit post-registration. Delay in registration should not bar credit.The Tribunal noted no provision barring Cenvat credit on pre-registration machine procurement. Lower authorities' argument that credit entries should not predate registration lacked merit. Properly maintained business records should suffice, as no specific record is mandated. The Tribunal found no basis to uphold the lower authorities' decision, setting it aside and allowing the appeals.Issue 2: Denial of Cenvat credit, interest, and penalty by Revenue.The Revenue's stance, denying Cenvat credit, interest, and penalty, was based on the premise that credit on imported machines before service tax registration was impermissible. This position led to proceedings and penalties confirmed by lower authorities.However, the Tribunal found the Revenue's argument lacking legal basis. No rule prohibits Cenvat credit on machines procured pre-registration. The absence of a specified period for credit post-procurement supports the appellant's position. The Tribunal emphasized the importance of accurate business records over arbitrary restrictions like pre-registration credit entry dates.Consequently, the Tribunal set aside the lower authorities' decisions, allowing the appeals and rejecting the Revenue's denial of credit, interest, and penalty.---