2016 (10) TMI 1092 - AT - Service Tax

Penalty - case of appellant is that due to confusion in the application of the law, the input credit taken, which was reversed on being pointed out - Held that - When erection and commissioning of water treatment plant was essential, there should not be denial of Cenvat credit of service tax paid in respect of such service availed for recycling of the water for use in manufacture - When the authority did not rule out use of the area for parking of the vehicles which are used in the manufacturing activities of the appellant, there cannot be disintegration between the input service as well as the purpose of the business and manufacture. Therefore, denial of Cenvat credit on this count is inconceivable. So far as the availing of services of the service of contractor for clearing of the jungle to accommodate the vehicle for transportation of the materials of the factory is concerned, the authority could not appreciate the necessity of such parking place for the vehicles - penalty only for this part upheld - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Applicability of penalty for confusion in input credit application.
2. Denial of Cenvat credit on service tax paid for erection and commissioning services.
3. Disallowance of Cenvat credit for services of a contractor for clearing jungle for vehicle parking.

Analysis:
1. The appellant claimed input credit on service tax paid for hall rent and hiring of a meeting place in a hotel, citing confusion in the application of the law. The appellant later reversed the credit upon realizing its inadmissibility. The tribunal found that there was no deliberate evasion by the appellant, and therefore, the levy of penalty was deemed unwarranted and waived.

2. The appellant contended that the service tax paid on erection and commissioning services for a water treatment plant should be available as Cenvat credit. The revenue opposed this claim, but the tribunal held that since the services were essential for recycling water for manufacturing, the denial of Cenvat credit was unjustified. Consequently, the appellant was granted the Cenvat credit for these services.

3. Regarding the denial of Cenvat credit for services of a contractor clearing jungle for vehicle parking, the authority had questioned the necessity of such parking space. However, the tribunal noted that the area could be used for parking vehicles used in manufacturing activities, making the denial of Cenvat credit inconceivable. As a result, the appellant was granted relief on this count as well. The appeal was allowed in part based on the above considerations.