2017 (9) TMI 155 - AT - Service Tax

Firm entitled to Cenvat credit on service tax paid by third party

The Tribunal held that the firm of Chartered Accountants was eligible to avail Cenvat credit on service tax paid by a third party under the category of ... Cenvat credit - Input service - Management or Business Consultant's Service as input - Utilisation of Cenvat credit for payment of service tax on output service - Chartered Accountant's ServiceCenvat credit - Input service - Management or Business Consultant's Service as input - Chartered Accountant's Service - Entitlement to Cenvat credit on service tax paid for 'Management or Business Consultant's Service' used by the appellant in providing Chartered Accountant's Service and its utilisation for payment of service tax on the output service. - HELD THAT: - Rule 2(l) of the Cenvat Credit Rules, 2004 defines 'input service' as any service used by a provider of taxable service for providing an output service. The appellants, a firm of Chartered Accountants, rendered taxable Chartered Accountant's Service to their client and availed the services of M/s. Sapphire Consulting Group classified as 'Management or Business Consultant's Service'. It was on record that the consultancy services were used in furnishing the appellants' output service. There is no restriction in the definition of 'input service' barring management or business consultancy from qualifying as an input for providing Chartered Accountant's Service. Consequently, where a service is used to provide an output service, the service tax paid on that input service is admissible as Cenvat credit and may be utilised towards payment of service tax on the output service.Cenvat credit availed on the Management or Business Consultant's Service is admissible and may be utilised to discharge service tax on the output Chartered Accountant's Service; the impugned order is set aside and the appeal is allowed.Final Conclusion: The Tribunal held that management or business consultancy services used in providing Chartered Accountant's Service qualify as input service under the Cenvat Credit Rules, 2004; the Cenvat credit taken is admissible and the impugned demand for the period 1-4-2006 to 30-9-2006 is set aside with the appeal allowed. Issues:- Eligibility for Cenvat credit on service tax paid by a third party.- Utilization of Cenvat credit for payment of service tax on output service.Analysis:Issue 1: Eligibility for Cenvat credit on service tax paid by a third partyThe appeal challenged an order by the Commissioner (Appeals) concerning the eligibility of a firm of Chartered Accountants to avail Cenvat credit on service tax paid by a third party, M/s. Sapphire Consulting Group, under the category of 'Management or Business Consultant's Service.' The Revenue contended that such service cannot be considered an input service for providing Chartered Accountant services, leading to a show cause notice and subsequent adjudication. The Tribunal noted that the firm had utilized the services of M/s. Sapphire Consulting Group to provide its output service to M/s. Koutons Retail India Ltd. The key contention was whether the Cenvat credit on the service tax paid by the third party was admissible. The Tribunal analyzed Rule 2(l) of the Cenvat Credit Rules, 2004, which defines 'Input Service' as any service used by the provider of taxable service for providing an output service. The Tribunal concluded that as long as the service is used to provide the output service, Cenvat credit of such Service Tax would be admissible. Therefore, the Tribunal held that the Cenvat credit availed was admissible, setting aside the impugned order and allowing the appeal.Issue 2: Utilization of Cenvat credit for payment of service tax on output serviceThe second issue addressed in the judgment was the utilization of the Cenvat credit for payment of service tax on the output service provided by the firm of Chartered Accountants to M/s. Koutons Retail India Ltd. The Tribunal confirmed that the firm had discharged the service tax on the consideration received for the service provided in connection with syndication for raising funds via private equity. The question for decision was whether the Cenvat credit on the service tax paid by the third party could be utilized by the firm to pay service tax on their output service. The Tribunal's analysis of the relevant provisions led to the conclusion that the Cenvat credit availed was indeed admissible for such utilization. Consequently, the Tribunal allowed the appeal, emphasizing that as long as the service is used to provide the output service, the Cenvat credit would be valid for payment of service tax on the output service.In summary, the judgment clarified the eligibility of a firm of Chartered Accountants to avail Cenvat credit on service tax paid by a third party under the category of 'Management or Business Consultant's Service.' The Tribunal held that as long as the service is used to provide the output service, the Cenvat credit would be admissible. Additionally, the judgment affirmed the firm's right to utilize the Cenvat credit for payment of service tax on their output service, ultimately allowing the appeal and setting aside the impugned order.