Cenvat credit on exported services may not be denied for prior non-registration where service tax was not payable.

Where exported services were not liable to service tax, prior non-registration under service tax did not by itself bar availment of Cenvat credit, because registration under Section 69 of the Finance Act, 1994 applies to persons liable to pay tax and the Cenvat Credit Rules did not make registration a condition precedent. For input services, the pre-2011 wider definition of "input service" required assessment of business nexus under the then-applicable legal framework, so a blanket denial for lack of nexus was not sustainable without fresh factual examination. The matter was therefore remanded for re-determination of credit eligibility and admissible rebate on the basis of law and evidence.

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Issues: (i) Whether Cenvat credit could be denied merely because it was taken before registration under service tax, when the services were exported and no service tax was payable. (ii) Whether the denial of credit on certain input services for alleged absence of nexus with the output exported services was sustainable.

Issue (i): Whether Cenvat credit could be denied merely because it was taken before registration under service tax, when the services were exported and no service tax was payable.

Analysis: Registration under Section 69 of the Finance Act, 1994 is required for a person liable to pay service tax. On the facts, the appellant was exporting services and was not liable to pay service tax during the relevant period. The relevant provisions of the Cenvat Credit Rules, 2004 did not impose registration as a pre-condition for taking credit, though utilisation of credit remained subject to the governing rules and documentary requirements. The conflict of views in precedent was resolved in favour of the line of authority holding that non-registration, by itself, does not disentitle a claimant from availing credit where service tax was not payable on the output service.

Conclusion: Denial of credit solely on the ground of prior non-registration was not sustainable.

Issue (ii): Whether the denial of credit on certain input services for alleged absence of nexus with the output exported services was sustainable.

Analysis: For the relevant period, prior to the 2011 amendment, the definition of input service had a wider ambit and covered services used in relation to business. The disputed services therefore required a factual re-examination in light of the applicable pre-amendment legal position and the authorities cited on admissibility of similar services. The earlier orders had not examined the claim in that legal framework, so the matter required fresh consideration by the Original Authority.

Conclusion: The finding of inadmissibility on the ground of lack of nexus was set aside for fresh determination.

Final Conclusion: The order below was set aside and the matter was remanded to the Original Authority to re-determine eligibility of credit and the admissible rebate in accordance with the applicable law and evidence.

Ratio Decidendi: Where exported services are not liable to service tax, mere absence of registration does not bar availment of Cenvat credit, and for the pre-amendment period the input service definition must be applied with its wider business nexus test.

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