Cenvat credit on deemed output services remains available where tax is paid and no statutory bar limits utilisation.
Credit on tax paid for deemed output services is treated as available where the recipient has discharged service tax on the received service, and denial is not justified merely because liability was paid under the deemed output scheme. Registration as an output service provider does not, by itself, determine eligibility for credit already relating to such services, and minor defects such as non-production of original invoices do not defeat credit where receipt and tax payment are established. The text also notes that such credit may be utilised for service tax payment where no statutory time bar applies, and that education cess was not chargeable for the period before 10-9-2004.
Issues: (i) whether service tax credit could be denied when the appellant paid tax as a recipient on a deemed output service; (ii) whether credit taken before and after the date of registration as output service provider, and credit supported by invoices not produced in original, was inadmissible; (iii) whether the credit could be utilised for payment of service tax in the circumstances of the case; (iv) whether education cess was payable for the relevant period.
Issue (i): whether service tax credit could be denied when the appellant paid tax as a recipient on a deemed output service.
Analysis: The services received from the foreign collaborator were treated as transfer of technology, but service tax had been paid as consulting engineer services at the instance of the department. The appellant performed the dual role of recipient and deemed output service provider. Since the tax had been paid on the services received, credit could not be denied merely because the liability was discharged on behalf of the service provider under the scheme of deemed output service.
Conclusion: The credit was rightly available to the appellant and denial on this ground was not sustainable.
Issue (ii): whether credit taken before and after the date of registration as output service provider, and credit supported by invoices not produced in original, was inadmissible.
Analysis: The date on which the appellant obtained registration for output services had no legal significance for credit on deemed output services received earlier. The receipt of service and payment of tax were not disputed. Likewise, denial of a small portion of credit for non-production of original invoices was unwarranted in the factual setting where receipt and tax payment stood established.
Conclusion: The disallowance of credit on these grounds was unsustainable.
Issue (iii): whether the credit could be utilised for payment of service tax in the circumstances of the case.
Analysis: The services taxed by the appellant were deemed output services under the Cenvat Credit Rules. Credit earned on such tax was available for utilisation, and no statutory time limit barred such utilisation. The later restriction confining input service credit to the same category of output service was not applicable to the appellant's factual situation, especially when it had also started rendering output services on its own.
Conclusion: Utilisation of the credit was permissible and the demand raised on this basis was not justified.
Issue (iv): whether education cess was payable for the relevant period.
Analysis: The demand related to a period prior to 10-9-2004, when the levy was not applicable to service tax.
Conclusion: Education cess was not payable.
Final Conclusion: The appellant succeeded on all substantive questions, the demands and penalties could not stand, and the appeals were allowed with consequential relief.
Ratio Decidendi: Credit cannot be denied where tax is paid on a deemed output service and the statute does not prescribe a time restriction on availment or utilisation in the circumstances proved.