2013 (11) TMI 1684 - AT - Service Tax

Summary

Issues involved: Cenvat credit availed on Service Tax paid on input service distributed by Input Service Distributor (ISD) for sub-contract charges for construction services, confirmation of demand for Cenvat credit, imposition of penalty, applicability of Rule 7 of Cenvat Credit Rules (CCR), invocation of suppression.

Cenvat credit availed on Service Tax paid on input service distributed by ISD for sub-contract charges for construction services: The appellant, engaged in manufacturing paints and varnishes, availed Cenvat credit of Service Tax paid on input service distributed by the corporate office as ISD for sub-contract charges for construction services. Proceedings were initiated questioning the admissibility of the credit as the construction service was not used or provided to the appellant unit. A demand for Cenvat credit of &8377; 6,54,636/- was confirmed along with the imposition of a penalty equal to the credit availed.

Applicability of Rule 7 of CCR: The Tribunal considered Rule 7 of CCR which allows ISD to distribute Cenvat credit of Service Tax paid on input service to its manufacturing units or units providing output service, subject to specified conditions. The Tribunal noted that the conditions, including not exceeding the amount of Service Tax paid on the document and distribution only to units where services are used wholly, were met in this case. The Tribunal also found that the decisions cited by the appellant's counsel supported the appellant's position.

Invocation of suppression: The appellant argued that the show cause notice lacked details on the basis for invoking suppression. The Tribunal held that in the absence of any finding of inadmissibility or non-fulfillment of conditions under Rule 7 of CCR, the appellant was entitled to a bona fide belief of admissibility. As the rule itself did not provide for denial of credit without specific grounds, the appeal was allowed with consequential relief to the appellant.