2011 (2) TMI 772 - AT - Service Tax

Cenvat credit - Input services in respect of Import of car - car was being used by the Managing Director of the company - held that - since the car is owned by an individual and not by the appellant, the services rendered in relation to the car cannot be considered as input services for the appellants company. - A company may meet the cost of maintenance or running expenses of the car of its employee as part of his terms of employment and these expenses would be in the nature of perks to the employee - Cenvat Credit denied - invocation of longer period is justified - As regards penalty, find that the appellant might have availed the credit under a bonafide impression that since the expenses as regards insurance etc. are being born by the company, they are entitled to take the credit - As such by invoking the provisions of Section 80 of the Finance Act, 1994, extend the benefit of doubt to the appellant and set aside the penalty imposed upon them - The appeal is disposed off in above terms.

Summary

Issues:
Availment of cenvat credit on service tax paid for loading and handling charges, service charges, and insurance premium in relation to the import of a car. Ownership of the car and its implications on considering services as input services for availing credit. Imposition of penalty and invocation of longer period due to non-disclosure of ownership details.

Analysis:
The judgment revolves around the dispute concerning the availment of cenvat credit amounting to Rs.2,08,252/- for service tax paid on various charges related to the import of a Porsche Cayenne Turbo Car. The appellant argued that the car was used for business activities by the Managing Director and, therefore, qualified as input services. On the contrary, the Revenue contended that since the car was registered in the name of the Managing Director, the services availed could not be considered input services for the company.

The Commissioner (Appeals) noted that the insurance policy listed the Managing Director as the insured party, establishing individual ownership rather than company ownership. The legal principle that a company is a separate legal entity from its directors was emphasized. It was clarified that even if the company covered expenses like insurance premiums, it did not imply ownership. The judgment highlighted that the services related to the car could not be deemed input services for the company since the car was owned by an individual, not the company.

The appellate authority upheld the denial of credit based on the reasoning that if the car owner was the Managing Director, it indicated individual ownership, not company ownership. The non-disclosure of ownership details to the Revenue justified the invocation of a longer period for assessment. However, considering the appellant's genuine belief in availing the credit, the penalty was set aside under Section 80 of the Finance Act, 1994, extending the benefit of doubt to the appellant. The judgment concluded by disposing of the appeal in favor of the Revenue, denying the credit but relieving the appellant of the penalty.

In summary, the judgment clarifies the distinction between individual and company ownership concerning the availment of cenvat credit on services related to an imported car. It emphasizes the importance of disclosing ownership details to the Revenue and extends leniency in penalty imposition based on the appellant's genuine belief.