2012 (9) TMI 811 - AT - Service Tax

Cenvat credit - input services utilized for authorized motor vehicles service center and business auxiliary services - trading activity - appellant had taken CENVAT credit on several services, which according to the revenue related to the sale of motor vehicles and not to the services provided by them Held that - Revenue denied cenvat credit on various input services such as transportation charges, pre-delivery inspection charges, warehousing charges, advertisement charges and hotel expenses. The credit in respect of the services other than advertisement expenses and hotel expenses are allowed and with regard to services relating to hotel expenses and advertisement expenses, the demand within the normal period of limitation is upheld.

Summary

Issues:
1. Eligibility of CENVAT credit on various input services related to motor vehicles.
2. Interpretation of input services in relation to trading activity.
3. Applicability of extended period and penalty imposition on service tax credit.

Issue 1: Eligibility of CENVAT credit on input services:
The case involved a respondent assessee registered for service tax payment related to motor vehicle servicing and business auxiliary services. The dispute arose when the revenue proposed to deny CENVAT credit on input services such as transportation charges, pre-delivery inspection charges, warehousing charges, advertisement charges, and hotel expenses. The original adjudicating authority demanded service tax with interest and penalty, which led to an appeal by the respondent. The impugned order ruled in favor of the respondent, allowing credit on all services utilized for providing authorized service station and business auxiliary services. The revenue appealed against this decision.

Issue 2: Interpretation of input services in trading activity:
The Authorized Representative argued that the respondent was not eligible for CENVAT credit as the services were not related to trading activity. Referring to a previous Tribunal decision, it was contended that services attributable to trading activity cannot be considered as input services. However, the respondent's Chartered Accountant cited another Tribunal decision to support the claim that certain services, like transportation of motor cycles to the authorized service station, were indeed input services. The respondent maintained that services such as goods transport agency services and pre-delivery inspection were directly linked to their activities as an authorized service station.

Issue 3: Applicability of extended period and penalty imposition:
After considering submissions from both sides, the judge found that certain charges like transportation, pre-delivery inspection, and warehousing were attributable to the respondent's activities as an authorized service station. However, the judge noted that advertisement charges and hotel expenses were not thoroughly discussed due to the small amounts involved. The respondent agreed to forgo the benefit of credit on these services, leading to their disallowance. The judge ruled that the invocation of the extended period and penalty imposition on these two services was not justified. Ultimately, the credit on services other than advertisement and hotel expenses was allowed, while the demand within the normal limitation period was upheld for the excluded services. No penalty was imposed on the respondent in this case.

In conclusion, the appellate tribunal decided in favor of the respondent on the eligibility of CENVAT credit for most input services related to their authorized service station and business auxiliary services. The judgment also clarified the treatment of specific services, the applicability of the extended period, and the penalty imposition based on the nature of the services and their relation to the activities of the respondent.