Tribunal Upholds Cenvat Credit for Foreign FCCB Services

The Tribunal upheld the respondent's right to cenvat credit for services related to FCCB issued outside India and its utilization in manufacturing dutiable products/services in India. Proper maintenance of records and compliance with Cenvat Credit Rules were crucial in determining credit admissibility. The appeal by Revenue was dismissed, granting consequential benefits to the respondent as per the law.

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Issues:
1. Whether cenvat credit of service tax paid on services related to Foreign Currency Convertible Bond (FCCB) issue outside India can be used for paying central excise duty in India.
2. Whether cenvat credit can be used without maintaining a separate account for common input services used in manufacturing both dutiable and exempted products/services.

Analysis:

Issue 1:
The appeal revolved around the utilization of cenvat credit on services received for FCCB issue outside India for paying central excise duty in India. The respondent, engaged in software manufacturing, availed services from foreign providers for FCCB, paying service tax on them. The Revenue contended that the services used outside India lacked correlation to the manufacture of dutiable products. However, the adjudicating authority found the credit correctly availed, considering the services' use in manufacturing dutiable products. The respondent argued that as the services were for financing manufacturing activities, credit should be allowed. The Commissioner upheld the credit utilization for manufacturing activities, which the Revenue failed to disprove. The Tribunal upheld the Commissioner's findings, dismissing the appeal by Revenue.

Issue 2:
The second issue focused on maintaining separate accounts for input services used in manufacturing both dutiable and exempted goods/services. The Revenue alleged lack of proper records for input service consumption, contrary to Rule 9(6) of the Cenvat Credit Rules, 2004. The respondent argued that the services were utilized for manufacturing activities in India, supported by the utilization statement. The Commissioner found the credit admissible for manufacturing and service provision in India, with no evidence against it. The Tribunal concurred, emphasizing the utilization of credit in dutiable activities. The respondent's compliance with Rule 6(5) and proper credit distribution by the Input Service Distributor were upheld, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal upheld the respondent's right to cenvat credit for services related to FCCB issued outside India and its utilization in manufacturing dutiable products/services in India. The proper maintenance of records and compliance with Cenvat Credit Rules were crucial in determining the admissibility of the credit. The appeal by Revenue was dismissed, granting consequential benefits to the respondent as per the law.

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