2013 (3) TMI 519 - AT - Service Tax

Utilization Cenvat Credit Service Tax - Appellant has taken and utilized Cenvat credit on purchase of PMP Certificate on Royalty paid to whirlpool which according to department is not a input services for providing service of Maintenance and Repair. Hence Cenvat credit wrongly taken and utilized is liable to be disallowed and recovered. The appellate authority upheld the adjudication order. Held that It is not understood the reason why service tax is collected against PMP certificate purchased since service tax is not commodity taxation but only upon providing taxable service, levy of service tax is permitted by Finance Act, 1994. There is no dispute that PMP certificate is relatable to Maintenance Repair of Whirlpool products since buyers of products of the said concern get assured post sales service.There was no examination done by the authorities below as to the incidence of payment of service tax on royalty. - Decided in favor of assessee.

Summary

Issues:
1. Incorrect utilization of Cenvat credit on purchase of PMP certificate and royalty payment for Maintenance & Repair services.
2. Lack of examination of evidence and material facts by the authorities.
3. Dispute over the applicability of service tax on the PMP certificate and royalty payment.

Analysis:
1. The appeal addressed the incorrect utilization of Cenvat credit by the appellant for the purchase of a PMP certificate and royalty payment to Whirlpool, which were deemed by the authorities as not input services for Maintenance & Repair services. The Adjudicating authority found the appellant wrongly utilized Cenvat credit, leading to the disallowance and recovery of the amount under the relevant rules and sections of the Finance Act.

2. The appellate authority below was criticized for upholding the adjudication order without conducting an independent examination of the PMP certificate and royalty payment evidence. It was noted that the authorities failed to provide their own findings of fact, demonstrating a lack of analysis of evidence, law, and material facts, which was deemed contrary to the legal requirements.

3. The dispute centered around the applicability of service tax on the PMP certificate and royalty payment. The appellant argued that both expenses were attributable to the Maintenance & Repair services of Whirlpool products, emphasizing the nexus between the expenses and the output service. However, the Revenue contradicted this argument without appreciating the connection between the expenses and the services provided, merely supporting the decisions of the lower authorities.

4. The judgment highlighted the absence of a valid reason for collecting service tax against the PMP certificate purchase, noting that service tax should only be levied upon providing taxable services as per the Finance Act. The lack of examination by the authorities regarding the incidence of service tax on royalty payment further weakened the Revenue's position. Ultimately, the ill-reasoned orders of the lower authorities led to the failure of Revenue's stance under the law, resulting in the allowance of the appeal due to the clarified factual aspects presented during the proceedings.