2015 (10) TMI 2535 - AT - Service Tax

Cenvat credit - service tax paid towards cost of insurance covered in the cost of Maintenance Service provided by M/s. Wartsila India Ltd. - Held that - there is no material on record to suggest that reversal is warranted when availing of service was not found to be irrelevant. There was no enquiry conducted by Revenue to ascertain whether the service tax of the above amount collected from the appellant has not gone to Treasury. There is also no finding on record to show that insurance was not related to operation and maintenance of the captive power plant of the appellant by the service provider. Therefore, appeal is allowed. Levy of interest - appellant submitted that interest has been levied on the two invoices while there was reversal of credit and appellant had sufficient credit on its record - Held that - subject to verification of the sufficiency of the credit on record, levy of interest shall be judged since the credit is claimed to have been not utilised. If the authority finds that the credit was not utilised but merely recorded in RG-23 register, there shall not be levy of interest on the amount reversed. Waiver of penalty - Held that - prayer is justified for the reasons stated as above. Therefore, Appeal is allowed on that count and there shall be no such penalty. - Decided in favour of penalty

Summary

Issues:
1. Entitlement to Cenvat credit for service tax paid towards cost of insurance in Maintenance Service.
2. Reversal of credit without cogent reason.
3. Levy of interest on invoices with credit reversal.
4. Verification of credit sufficiency and interest levy.
5. Waiver of penalty justification.

Entitlement to Cenvat Credit:
The appeal centered on whether the appellant, who paid service tax for insurance cost in Maintenance Service, could claim Cenvat credit for the tax paid. The authorities below had concluded that the appellant needed to reverse the credit without providing a valid reason for such action. However, it was highlighted that there was no evidence to support the reversal, as the service availed was not deemed irrelevant, and there was no inquiry by Revenue to confirm whether the service tax amount collected had not reached the Treasury. The lack of findings indicating that the insurance was unrelated to the operation and maintenance of the appellant's power plant led to the allowance of the appeal.

Levy of Interest and Credit Verification:
The appellant's counsel argued that interest was imposed on the invoices where credit was reversed, despite the appellant having sufficient credit in its records. It was suggested that interest should be assessed based on the actual utilization of the credit. The judgment directed a verification of the sufficiency of the credit on record and stated that interest should not be levied if the credit was merely recorded in the register without being utilized.

Waiver of Penalty:
Lastly, the appellant sought the waiver of a penalty amount, contending that it should be justified given the circumstances. The judgment agreed with this submission, citing the reasons provided, and ruled in favor of the appellant by allowing the appeal and eliminating the penalty.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT CHENNAI highlighted the key issues of entitlement to Cenvat credit, reversal of credit without valid reasons, levy of interest, credit verification, and waiver of penalty. The decision provided clarity on each aspect, emphasizing the need for proper justification in credit reversals, verification of credit sufficiency before levying interest, and the justification for waiving penalties under specific circumstances.