2013 (7) TMI 628 - AT - Service Tax

CENVAT credit - input services - Assessee provided immovable property on rent - order beyond the scope of SCN - part of premises was rented out - Held that - Assessee were eligible for the Cenvat Credit in respect of service tax paid on Maintenance service in respect of 998 Sq. ft. of the total area - service and maintenance and repair service in respect of rest of the area will not be covered under definition of inputs service as that has not been used in providing the output services. Penalty u/s 76 and 78 Held that - amount of penalty imposed under Section 78 would be sustained penalty cannot be imposed more than the amount of CENVAT credit appeal decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of Cenvat Credit on Maintenance Service
2. Imposition of Penalty under Section 76 and 78 of Finance Act

Analysis:

Issue 1: Disallowance of Cenvat Credit on Maintenance Service
The appeal was filed against the Order in Original that disallowed a portion of the Cenvat Credit claimed by M/s Treat Convenience Foods. The Department contended that the credit should be restricted to the area let out to M/s Domino's Pizza India Ltd. The appellant argued that the entire Cenvat Credit should be allowed under Rule 6(5) of the Cenvat Credit Rules as Maintenance and Repair service is a specified input service. The Tribunal found that the input service must be used in providing output service, and in this case, the maintenance and repair service for the area other than 998 Sq. ft. was not used in providing output services. Therefore, the appellant was held eligible for the Cenvat Credit amounting to Rs. 17,982 only, as proposed in the original Show Cause Notice. The rest of the amount was deemed inadmissible.

Issue 2: Imposition of Penalty under Section 76 and 78 of Finance Act
The Tribunal noted that a penalty had been imposed on the appellant under both Section 76 and 78. However, since the original proposal in the Show Cause Notice was to restrict the Cenvat Credit to Rs. 17,982 only, the penalty should not exceed that amount. Additionally, after an amendment, penalties cannot be imposed under both Section 76 and 78 simultaneously. Therefore, the Order in Appeal was confirmed for the confirmation of service tax of Rs. 17,982 and an equal amount of penalty imposed under Section 78. The appeal was disposed of accordingly.

This judgment clarifies the eligibility criteria for Cenvat Credit on input services and highlights the limitations on penalty imposition under different sections of the Finance Act. The Tribunal's decision was based on a thorough analysis of the relevant rules and the original Show Cause Notice, ensuring a fair outcome for the appellant.