2015 (8) TMI 1342 - AT - Service Tax

CENVAT credit - input service - Security Services on Guest House - Erection and Commissioning Services - Held that - So far as the Cenvat credit on Security Services on Guest House is concerned that is no way related to manufacture for which assessee shall not get the Cenvat credit thereon. So far as Erection and Commissioning Services is concerned that has a direct bearing on the power generation. Even though the power generated at a place was availed to use the same in the manufacture that establishes a vital link between input or input service used and manufactured. Accordingly appellant is entitled to the Cenvat credit on the Erection and Commissioning Services availed. Imposition of penalty - Held that - penalty shall not be levied on the Cenvat credit because the appellant substantially succeeds on the Erection and Commissioning Service. Appellant s bona fide belief was that Security Services was part of power generation activity. Noticing no mala fide there shall be no penalty even on this service. Appeal allowed - decided partly in favor of assessee.

Summary

Issues:
1. Bifurcation of Cenvat credit attributable to different input services.
2. Eligibility of Cenvat credit on Security Services and Erection and Commissioning Services.
3. Penalty imposition on Cenvat credit.

Analysis:

Issue 1: Bifurcation of Cenvat credit
The judgment highlights that both lower authorities failed to bifurcate the quantum of Cenvat credit attributable to different input services, leading to difficulty in scrutiny at higher levels. This lack of segregation was deemed sufficient to set aside the adjudication, emphasizing the importance of clear identification and allocation of credit to specific services for proper assessment.

Issue 2: Eligibility of Cenvat credit
Regarding the Cenvat credit on Security Services at the Guest House, it was established that such services were not related to the manufacturing process, thus disallowing the credit. However, in the case of Erection and Commissioning Services for Wind Turbine Generators, a direct link to power generation was recognized. Despite the services not being directly used in manufacturing, the utilization of power generated for manufacturing purposes established a crucial connection, justifying the appellant's entitlement to Cenvat credit for these specific services.

Issue 3: Penalty imposition on Cenvat credit
Considering the decision on the eligibility of Cenvat credit for Erection and Commissioning Services, it was determined that penalty imposition would not be justified as the appellant substantially succeeded on this aspect. The absence of mala fide intent in claiming Security Services as part of power generation activities further supported the decision to waive penalties, emphasizing the appellant's bona fide belief. Therefore, the appeal was allowed to the extent indicated, with no penalties imposed on the Cenvat credit.

In conclusion, the judgment addressed the critical issues of proper bifurcation of Cenvat credit, eligibility criteria for specific input services, and penalty imposition, providing a comprehensive analysis to clarify the appellant's entitlement to Cenvat credit on Erection and Commissioning Services while exempting penalties based on the circumstances and beliefs of the appellant.