2011 (2) TMI 329 - AT - Service Tax

Cenvat credit - Rule 2(l) of the Cenvat Credit Rules - whether the services of construction, repair and maintenance of the building, cleaning services, etc. availed by the respondent in the residential colony of the factory are eligible for cenvat credit - Time limitation - the issue of invoking extended period and imposition of penalty has to be remanded to the original adjudicating authority for de novo decision. However, it is clarified that even if penalty under Rule 15(2) of the Cenvat Credit Rules, 2004, read with section 11AC, of the Central Excise Act is not imposable, for wrong availment of cenvat credit, the penalty under Rule 15(1) of the Rules would be attracted - Decided against the assessee

Summary

Issues:
1. Eligibility of cenvat credit for services availed in a residential colony.
2. Validity of invoking extended period for demanding cenvat credit.
3. Imposition of penalty under Rule 15 of the Cenvat Credit Rules.

Issue 1: Eligibility of cenvat credit for services availed in a residential colony:
The Respondent, as cement manufacturers, availed cenvat credit for services like construction, repair, and maintenance of residential complexes, among others. The department contended that these services were not eligible for credit as they were not directly related to manufacturing activities. Show-cause notices were issued demanding the allegedly wrongly taken cenvat credit. The Asstt. Commissioner confirmed the demands along with penalties. On appeal, the Commissioner (Appeals) set aside the orders based on a Tribunal judgment. The revenue appealed against this decision, arguing that the services had no nexus with manufacturing activities, citing a Bombay High Court judgment. The Respondent, while acknowledging the adverse judgment, argued that they had taken the credit in good faith based on a Tribunal ruling. The Tribunal noted the Bombay High Court's decision and ruled that the services in question were not eligible for cenvat credit, setting aside the Commissioner's orders.

Issue 2: Validity of invoking extended period for demanding cenvat credit:
The department invoked the extended period for demanding cenvat credit, alleging non-disclosure of services in the ER-I Return. The Respondent argued that the demand for a specific period was time-barred as there was no suppression of facts. The Tribunal found that the Asstt. Commissioner did not adequately justify invoking the extended period and remanded the issue for reconsideration. It clarified that even if the penalty under Rule 15(2) was not applicable, a penalty under Rule 15(1) would still be imposed for the wrong availment of cenvat credit.

Issue 3: Imposition of penalty under Rule 15 of the Cenvat Credit Rules:
The Asstt. Commissioner imposed penalties under Rule 15 of the Cenvat Credit Rules, which were challenged by the Respondent. The Tribunal remanded the penalty issue for further consideration, emphasizing the need for a detailed assessment of the conditions for invoking the extended period and imposing penalties. It directed the original adjudicating authority to decide on the extended period, demand recalibration if necessary, and the imposition of penalties under Rule 15(2) of the Cenvat Credit Rules, 2004, read with section 11AC.

In conclusion, the Tribunal upheld the revenue's appeal regarding the eligibility of cenvat credit for certain services, set aside the Commissioner's orders, and remanded the penalty and extended period issues for further assessment.