2020 (1) TMI 996 - AT - Central Excise

Appellate Tribunal overturns demand for Service Tax, Interest, and penalty, emphasizes service utilization for Cenvat Credit.

The Appellate Tribunal CESTAT AHMEDABAD allowed the appeal by M/s. Unimed Technologies Limited, overturning the demand for Service Tax, Interest, and ... CENVAT Credit - input services - contract for supply of certain technology/Know-how - entire case of revenue is that the appellant have not used the service provided by SPIL & SPARC and, therefore, they cannot avail the said credit of service tax paid by SPIL & SPARC - HELD THAT:- The only fact that revenue has used to insist that the service was provided to the appellant and exported by the appellant on the same day is that the date of invoice is common. It is apparent from the facts of the case that the service was not provided in one day, the service was provided in a particular time duration and the service provided was being simultaneously used by the appellant by Supervising and Monitoring the activity in the entire duration. Thus, it cannot be correct to say that the service provided by the SPIL was not used by the appellant. The revenue’s argument is that the entire service was provided on the date of invoice is totally fallacious and illogical. Thus, the appellants received and consumed the service while they were participating in the development of technology by supervising and monitoring the same. There are no merit in the argument of the revenue that the services provided by SPIL was not used by the appellant and were exported as such - the agreement in respect of SPARC is also the same and, therefore, the arguments above are equally applicable to the services provided by SPARC - thus, there are no merit in the arguments of the revenue that services were exported without use by the appellant and, therefore, no credit is admissible. Appeal allowed - decided in favor of appellant. Issues:Appeal against demand for Service Tax, Interest, and penalty under Section 11 AC read with rule 15 (2) of the Cenvat Credit Rules and under Rule 26 of the Central Excise Rules, 2002.Analysis:1. Issue of Availing Cenvat Credit for Service Tax:The appellant, M/s. Unimed Technologies Limited, entered into agreements with SPIL and SPARC for research and development technology transfer. The revenue contended that the services were never used by the appellant but exported, thus denying Cenvat Credit. The appellant argued that being registered under Scientific and Technical Consultancy Service, the credit cannot be denied. Citing tribunal decisions, the appellant emphasized that credit for services used for providing the same service cannot be denied.2. Interpretation of Cenvat Credit Rules and Export of Services:The appellant relied on Rule 3(5) of Cenvat Credit Rules, asserting that input service can be exported after availing credit. They argued that such services cannot be consumed upon use, highlighting the distinction between Goods & Services. The Authorized Representative, however, supported the revenue's stance, emphasizing that exporting services without use does not entitle credit.3. Use of Service by Appellant and Export on the Same Day:The Tribunal examined the agreements between the appellant and SPIL, noting the appellant's right of supervision and monitoring in the development process. It was observed that the appellant actively participated in the development by supervising and monitoring, constituting the use of services. Dismissing the revenue's claim that services were not used and exported on the same day, the Tribunal held that the appellant consumed the services during the development process.4. Decision and Conclusion:The Tribunal found no merit in the revenue's argument that services were exported without use, allowing the appeal. The judgment emphasized the active involvement of the appellant in supervising and monitoring the service development, leading to the conclusion that the services were indeed used. Consequently, the appeal was allowed, overturning the demand for Service Tax, Interest, and penalty.In conclusion, the judgment by the Appellate Tribunal CESTAT AHMEDABAD highlighted the crucial aspect of service utilization in claiming Cenvat Credit, emphasizing active involvement in service development to establish usage. The detailed analysis of the agreements and supervisory role played by the appellant underscored the legal basis for allowing the appeal and rejecting the revenue's contention.