2026 (1) TMI 1460 - AT - Central Excise

CENVAT credit entitlement dispute over business support services confirms credit where service tax was collected and deposited, order set aside

The note addresses CENVAT credit entitlement for business support services, emphasizing that services taxable under the Finance Act cannot be physically ... CENVAT credit entitlement and legality of denial - Classification of Business Support Service and existence of taxable service - Limitation in issuance of show cause notices - Doctrine credit allowed where service tax collected and deposited by service provider - HELD THAT:- Services, on which taxes are leviable under Finance Act, 1994, cannot be mapped physically in the manner in which goods may be. Its passage is determined by consideration purportedly made, or agreed to be made, over as quid pro quo. That such remittance has been made from appellant’s end is not in dispute just as the uncontroverted invoices evidence inclusion of tax in addition to the cost and there is no allegation that the taxes so collected were not deposited with the exchequer. The decision in re Maruti Suzuki Ltd [2009 (8) TMI 14 - SUPREME COURT] pertained to the scheme of credit preceding CENVAT Credit Rules, 2004 and was concerned with ‘inputs’ used for generation of power, a non-excisable good, that was not captively consumed but transmitted to others. The dispute in this appeal deals with taxable services deployed for manufacturing activity. The availing of credit of duty paid on ‘inputs’ that were not used for manufacture of excisable goods is far removed from the factual matrix of the dispute before us. In re Manikgarh Cement, the issue under dispute was nexus of taxable service with manufacturing activity while, here, it is the lack of service – an existential issue – that is in dispute. Both these decisions have no bearing in resolution of this issue. In view of the above, the impugned order is set aside to allow the appeal. Issues: Whether the impugned demand for recovery of CENVAT credit of 7.07,23,732 and imposition of penalty under Rule 15 of CENVAT Credit Rules, 2004, on account of alleged non-existence or ineligibility of 'service' for payments made to M/s Aditya Birla Management Corporation Pvt Ltd (ABMCPL) as cost-sharing, was legally sustainable.Analysis: The Tribunal examined whether the payments remitted to ABMCPL, for which invoices were raised and service tax was collected and paid by ABMCPL, constituted taxable 'Business Support Service' under the Finance Act, 1994 and were therefore eligible as input service for CENVAT credit. The Court considered prior rulings holding that where a group service provider has paid service tax under Business Support Service and distributed the charged amount to group companies by invoicing, the nature of such apportionment does not alter the character of the service; the gross amount charged as per Section 67 represents the value of taxable service. The Tribunal also noted authorities addressing the illegality of denying credit in the recipient's jurisdiction when tax has been accepted/paid by the provider, and observed that the impugned order went against these principles. The Tribunal distinguished decisions cited by the respondent as factually inapposite. The cumulative legal framework applied includes the definitions and scope of Business Support Service under the Finance Act, 1994 and the CENVAT Credit Rules, 2004, together with the rule that service tax collected and paid by the provider and evidenced by invoices supports entitlement to credit, subject to limitation issues where applicable.Conclusion: The impugned order denying CENVAT credit and imposing penalty is set aside; appeal allowed in favour of the assessee.