2011 (11) TMI 261 - AT - Service Tax

CENVAT credit of the service tax paid on outdoor catering services when the cost of catering is being recovered from employees imposition of penalty Held that - From the decision of High Court in the case of CCE Nagpur vs. Ultratech Cement Ltd (2010 - TMI - 78203 - Bombay High Court) it is clear that assessee is not entitled to take CENVAT credit of service tax on that amount of catering service which has been recovered from their employees.- Decided in favor of Revenue. Since issue was already decided by the Tribunal then in favor of the assessee therefore no suppression can be alleged against the assessee. It relates to the interpretation of the law. Hence no penalty is imposable under Rule 15 read with Section 11AC of the Act Decided in favor of assessee.

Summary

Issues:
1. Admissibility of CENVAT credit on service tax paid for outdoor catering services when cost is recovered from employees.
2. Imposition of penalty under Rule 15 read with Section 11AC of the Central Excise Act.

Analysis:

Issue 1: Admissibility of CENVAT credit
The case involved appeals by the Revenue against the order-in-appeal passed by the Commissioner (Appeals) regarding the admissibility of CENVAT credit on service tax paid for outdoor catering services by M/s. Motherson Sumi Systems. The Revenue contended that the High Court's decision in CCE vs. Ultratech Cement Ltd. had settled the issue, stating that if the cost of catering is recovered from employees, the service tax credit would not be admissible. The respondent, however, argued that the Tribunal's decision in GTC Industries case favored them and that the issue revolved around the interpretation of the statute, thus no penalty should be imposed. The Tribunal, after considering both arguments, referred to the High Court's judgment, which clarified that the manufacturer cannot claim credit on the portion of service tax borne by the consumer. Consequently, the Tribunal held that the assessee was not entitled to take CENVAT credit on the amount of catering service recovered from their employees, upholding the service tax amount confirmed by the Assistant Commissioner.

Issue 2: Imposition of penalty
Regarding the imposition of penalty under Rule 15 read with Section 11AC of the Central Excise Act, the Tribunal noted that the issue had already been decided in favor of the assessee by the Tribunal. As the matter pertained to the interpretation of the law and there was no suppression by the assessee, the Tribunal ruled that no penalty should be imposed on the respondent. The Tribunal emphasized that in such circumstances, where the issue is related to the interpretation of the law and had been previously decided in favor of the assessee, there could be no mandatory penalty imposed. Therefore, the Tribunal concluded that no penalty was imposable on the respondent under Rule 15 read with Section 11AC of the Act.

In conclusion, the Revenue's appeals were allowed only in respect of the service tax amount along with interest, as the Tribunal upheld the disallowance of CENVAT credit on the catering service amount recovered from employees and ruled out the imposition of a penalty on the respondent due to the interpretational nature of the legal issue involved.