Cenvat credit for separately registered service branch sustained where input services supported taxable output service and tax was paid.

Cenvat credit could not be denied to a separately registered service branch merely because it operated under a common PAN-based structure, where the branch was paying service tax on the output service and the disputed input services were used for providing that taxable service. The text notes that the Ahmedabad service branch held separate registration and used input services such as advertisement, telephone, bank charges and insurance for repair and maintenance services supplied to customers. Once tax on the output service was accepted, denial of corresponding credit on the basis of internal branch arrangement was not sustainable. The related interest and penalty were therefore also unsustainable.

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Issues: Whether Cenvat credit of Rs. 4,06,163 could be denied to a separately registered service branch on the ground that it functioned under a common PAN-based registration and was part of the main unit, despite payment of service tax on the output service and use of input services for providing that output service.

Analysis: The appellant had obtained a separate registration for the Ahmedabad service branch and was discharging service tax on repair and maintenance services provided to customers. The disputed credit related to input services such as advertisement, telephone, bank charges and insurance, which were used for providing the output service. Once the department had accepted the tax payment on the output service, denial of credit on the ground of common PAN-based registration and internal branch structure was not sustainable where the input services were used for the taxable output service.

Conclusion: The appellant was entitled to the Cenvat credit, and the denial of credit, along with the related interest and penalty, was unsustainable.

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