By TIOL News Service

MUMBAI, JULY 03, 2018: CENVAT credit has been denied to the appellant alleging that the same has been incorrectly availed on Club & Association Service. Service Tax is also demanded u/s 66A of the FA, 1994 on the commission and on amounts paid for other services received from M/s Ducon Technologies Inc. USA.

In appeal before CESTAT, the Appellant submits that they had obtained registration on 22nd August 2006 and had started functioning from their premises at Thane from 11th April 2006 and it is the credit which was availed in the interregnum that is in dispute. It is further submitted that the place of registration and incidence of registration is not material for which reliance is placed on the decision of Karnataka High Court in mPortal India Wireless Solutions Pvt. Ltd. - 2011-TIOL-928-HC-KAR-ST

The AR supported the order of the lower authority and submitted that the appellant, not being an assessee, could not avail the privileges of CCR, 2004; that as regards credit availed on tax paid for membership of club is concerned, the facilities and privileges of membership are not restricted to appellant or its employees but also to the families which, therefore, does not meet the description of 'input service'.

The appellant fairly accepted the denial of credit to this extent.

On the issue of registration as pre-requisite for availment of credit, the Bench relied upon the decision in DNH Spinners - 2009-TIOL-1216-CESTAT-AHM to the effect that substantive benefit cannot be denied on procedural grounds. Inasmuch as failure to register being a mere technical infirmity which could not stand in the way of availment of CENVAT credit and there being no dispute on the eligibility of various inputs/input services on which credit is claimed and the appellant having secured registration within a few months of shifting their operations to the new premises, the gap between the receipt of service and the registration is not of such significance to disallow availment, the demand pertaining to availment without registration was set aside. [mPortal Wireless Solutions Pvt. Ltd. refers].

In the matter of amount received as mobilization advances, the appellant submitted that the same has been subject to tax subsequently upon settlement of the bills and which aspect had not been examined by the adjudicating authority, therefore, the matter was remanded to the said extent.

As regards demand of service tax u/s 66A of the Finance Act, 1994, it was observed that the appellant had imported certain manufacturing equipment and the terms of agreement prescribed payment of some fees that were linked to sale of the output in India; therefore, the classification of the service as 'Scientific and Technical Consultancy' in the SCN appears to be inappropriate and should have been 'Intellectual Property Service'; that in view of the decision in Catapro Technologies - 2017-TIOL-19-CESTAT-MUM unless the Intellectual Property was subject to Indian laws the question of taxability would not arise; that the demand u/s 66A of FA, 1994 would not survive.

The appeal was disposed of accordingly.

(See 2018-TIOL-2033-CESTAT-MUM)