2016 (3) TMI 1132 - AT - Service Tax

CENVAT credit - non-disclosure of availing of credit in ST-3 returns - Held that - I hold that inputs credit availed on catering service is allowable as the same is directly utilised in the business of the appellant of banking and other financial services. It goes without saying that satisfied customers, will lead to increased business and development. So far the Cenvat credit is concerned for April to September 2007, the appellant have filed in the paper book details of the invoices with date etc. amount of service tax paid etc. is reflected. I hold that the appellant will be entitled to Cenvat credit for the period in question. I remand to the adjudicating authority for the limited purpose to verify the amount of Cenvat credit and allow the credit accordingly. Upon such hold that extended period of limitation is not invocable in the facts and circumstances - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved:
1. Disclosure of CENVAT Credit entitlement in service tax return
2. Disallowance of CENVAT credit on catering service for banking and financial services
3. Imposition of penalty equal to CENVAT Credit disallowance
4. Time-barred duty demand

Analysis:

1. The first issue revolves around the non-disclosure of CENVAT Credit entitlement in the service tax return. The appellant, a Co-operative Bank Ltd., had availed CENVAT credit but failed to disclose it in the ST-3 Return for a specific period. The appellant argued that due to a clerical error and imperfect understanding, the CENVAT Credit availed details were not correctly filled in the return. The Appellate Tribunal held that the appellant should be entitled to the CENVAT credit for the period in question, emphasizing that the clerical mistake in the return should not deny the credit.

2. The second issue concerns the disallowance of CENVAT credit on catering services used in providing banking and financial services by the appellant. The appellant contended that catering services were essential for customer meetings, redressing complaints, and promoting business, thus directly contributing to their output services. The Tribunal agreed with the appellant, stating that catering services are allowable as input services for the banking business, leading to customer satisfaction and business growth.

3. The third issue involves the imposition of a penalty equal to the disallowed CENVAT credit amount. The Appellate Commissioner had imposed a penalty under Section 76 of the Finance Act, 1994, equal to the CENVAT Credit disallowance. The Tribunal, after considering the arguments from both sides, allowed the appeals and held that the penalty should not be increased to the disallowed CENVAT credit amount.

4. The final issue pertains to the time-barred duty demand. The appellant raised the contention that the duty demand for a specific period was time-barred since the show cause notice was issued after a considerable delay. The Tribunal, after thorough consideration, held that the extended period of limitation was not applicable in the given circumstances, thereby ruling in favor of the appellant.

In conclusion, the Tribunal allowed both appeals, granting the appellant the entitlement to CENVAT credit, disallowing the penalty equal to the disallowed credit amount, and rejecting the time-barred duty demand. The judgment highlights the importance of correctly disclosing credit entitlements, justifying input services, and adhering to statutory timelines in tax matters.