Cenvat credit on input services remains available despite bad debt write off for taxable output services; no automatic reversal required.

Cenvat credit on input services attributable to taxable output services is not required to be reversed solely because the provider wrote off the output-service receivable as a bad debt. The note applies binding tribunal precedent to state the legal principle that irrecoverability of consideration for the output service does not defeat entitlement to input-service cenvat credit; therefore the operative effect is that write off of receivables does not automatically trigger reversal of corresponding input-service credit, and the outcome favours retention of the credit.

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Issues: Whether cenvat credit availed on input services attributable to taxable output services must be reversed where the invoiced output-service receivable was written off as a bad debt.

Analysis: The Tribunal applied existing binding tribunal precedent holding that entitlement to cenvat credit on input services is not defeated merely because the provider of the taxable output service could not realize the invoice amount and has written it off as bad debt. The decision follows earlier decisions including the Tribunal's own ruling in M/s. Vodafone Cellular Ltd. and the principles applied in CST, Ahmedabad v. Krishna Communication and subsequent authorities, which establish that irrecoverability of consideration for the output service does not automatically mandate reversal of input-service credit attributable to that output.

Conclusion: Cenvat credit availed on input services attributable to taxable output services need not be reversed on account of the output-service receivable being written off as bad debt; conclusion is in favour of the assessee.

Ratio Decidendi: Entitlement to cenvat credit on input services remains unaffected by the provider's inability to recover payment for taxable output services, and non-recovery/writing off of the output-service receivable does not require automatic reversal of the corresponding input-service credit.

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