2016 (8) TMI 1257 - AT - Service Tax

CENVAT credit - various input services - scope of input services - Rule 2(l) of the Cenvat Credit Rules 2004 - Telephone service - Catering service - C & F Agent of Depot - Cargo Handling Service of Depot - Business Auxiliary Service of depot - Outward transportation of goods - outdoor catering in guest house - the pandal and shamiyana service - Held that - the outdoor catering in guest house and the pandal and shamiyana service are not confirming to definition of input service and those services have no nexus with the manufacture of cement. Thus Cenvat credit on these two services are not available to the appellant - credit denied. Telephone service - Held that - the appellant in reply to the show cause notice has specifically stated that the telephones were installed in the residences of some of the Officers. Since the telephones were not installed within the factory Cenvat credit on such service is also not available - credit denied. Catering service - C & F Agent of Depot - Cargo Handling Service of Depot - Business Auxiliary Service of depot - Held that - Cenvat credit is permissible for the reason that those services have nexus with manufacturing business of the appellant - credit allowed. Outward transportation of goods - Held that - Since the goods were delivered on FOR destination basis and the period involved is from January 2005 to July 2005 I am of the view that the Cenvat credit taken on such service is available to the appellant - credit allowed. Penalty u/r 26 on Sh. Vijay Kr. Jain employee - Held that - penalty not justified since the Department has not brought on record any evidence regarding the involvement of the employee in the fraudulent activities concerning fraud collusion mis-statement etc. - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues: Denial of Cenvat credit on input services; Imposition of penalty under Rule 26

Denial of Cenvat credit on input services:
The case involved the denial of Cenvat credit on various input services from January 2005 to July 2005. The Department disallowed the credit on services like outdoor catering, telephone service, and pandal and shamiyana service, stating they did not meet the definition of Input Service. The tribunal found that outdoor catering in guest houses and pandal/shamiyana services lacked nexus with cement manufacturing, thus denying Cenvat credit for these services. Regarding telephone service, as the telephones were installed outside the factory premises, the credit was also disallowed. However, credit for catering service in the factory, C & F Agent of Depot, Cargo Handling Service of Depot, and Business Auxiliary Service of Depot was allowed due to their direct connection with the manufacturing business. The tribunal also permitted Cenvat credit on outward transportation of goods as the appellant availed credit for freight on FOR destination basis, aligning with the period in question. Consequently, the appeal was partly allowed for services at specific Sl. Nos., and the penalty amount was reduced to the disallowed credit.

Imposition of penalty under Rule 26:
The tribunal addressed the imposition of a penalty on an individual under Rule 26, finding it unjustified due to the lack of evidence demonstrating the employee's involvement in fraudulent activities related to fraud, collusion, or misstatement. Consequently, the penalty on the Manager (Accounts) was set aside, and the appeal was allowed. Both appeals were disposed of based on the above findings, providing clarity on the Cenvat credit eligibility and penalty imposition under Rule 26.

(Dictated and pronounced in the open Court)