CESTAT Mumbai Allows Lombardini ₹56 Lakh CENVAT Credit, Holds It Can't Be Denied When Tax Is Accepted

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on 5 February allowed Lombardini India to claim CENVAT credit of Rs. 56 lakhs in a case where it had entered into an agreement with Kohler India for certain services.

A Bench comprising Judicial Member S.K. Mohanty and Technical Member M.M. Parthiban observed that once service tax has been collected by the service provider and accepted by the Department, the credit cannot be denied to the recipient. They held:

“…once the tax liability has been discharged and accepted by the department, the consequential CENVAT credit cannot be denied at the recipient's side.”

Lombardini had availed the credit based on proper invoices raised by Kohler India, which showed service tax duly paid into the government exchequer.

The Department however, denied the credit on the ground that the invoices were mere reimbursements and no actual services were provided. This had led to a demand with interest and penalty, prompting the appeal before CESTAT.

CESTAT set aside the disallowance and allowed Lombardini India to avail and utilize the credit paid on such input services. The Tribunal reinforced that a manufacturer or service recipient cannot be denied CENVAT credit where the service provider has already paid the tax and the Department has accepted it.

The Bench also noted that the Lamborghini had acted in accordance with Rule 3 of the CENVAT Credit Rules.

Relying on the Supreme Court's decisions in MDS Switchgear, and Tribunal decisions in IFB Industries and ICICI Lombard General Insurance Co. Ltd, it held:

“In view of the judicial pronouncements (supra), we are of the view that the denial of CENVAT credit in the present case to the appellant cannot be sustained.”

Accordingly, the CESTAT set aside the disallowance and allowed Lombardini India to avail and utilize the credit paid on such input services.

For Appellant: Advocate Bharat Raichandani

For Respondent: Mr. Rajiv Ranjan (Authorized Representative)