2013 (9) TMI 551 - AT - Service Tax

Eligibility for CENVAT credit Penalty under Rule 15 - Whether the assesse would be eligible for Cenvat credit of service tax paid on services of renting of immovable property and services of club membership - Held that - As such membership of the club would be covered by the definition of input services - This was an association of engineering products manufacturers and the association provides the market related information, information about new technology, etc., to its members which was essential to carry out business and such information was the basic need of an industry to stand in competition in the market. - . However, appellant has not shown as to how the membership of India International Centre, New Delhi has the nexus with the manufacturing business and as such the services tax paid on the membership fee of this club is not cenvatable. - Decided against the assessee. Renting of Car Parking Space - Held that - The car parking space had been used for parking of the vehicles of the assesse-company and its officers and as such this service had nexus with the business of the assesse and had to be treated activity related to business Repying upon - CCE, Nagpur Versus Ultratech Cement Ltd., 2010 (10) TMI 13 - BOMBAY HIGH COURT - The service would have to be treated as an input service. Bar of Limitation - Held that - Only normal limitation period would be available to the department for recovery of ineligible Cenvat credit - the assesse cannot be accused of suppression of the relevant information as it was not the allegation of the department that the appellant in terms of legal requirements were required to give invoice-wise and item-wise details of Cenvat credit which they had not given - Prolite Engg v. CCE 1990 (3) TMI 89 - HIGH COURT OF GUJARAT Order set aside. The matter remanded to the original adjudicating authority for re-quantification of the Cenvat credit demand - The penalty under Rule 15(1) would be only in proportion the Cenvat credit demand confirmed.

Summary

Issues:
1. Eligibility for Cenvat credit of service tax paid on renting of immovable property and club membership.
2. Nexus of services with manufacturing business.
3. Question of limitation regarding Cenvat credit availed.

Analysis:

Issue 1: Eligibility for Cenvat credit of service tax paid on renting of immovable property and club membership.
The appellant, a manufacturer of various products chargeable to central excise duty, contested the denial of Cenvat credit on service tax paid for renting car parking space and club memberships. The Asstt. Commissioner disallowed the credit, leading to an appeal. The appellant argued that these services were essential for their business and formed part of the cost of their final products. Citing relevant case law, they contended that when a service contributes to the cost of the final product, the credit should be allowed. The Departmental Representative, however, disputed the nexus of these services with manufacturing and highlighted alleged discrepancies in the appellant's claims. The Tribunal examined the arguments and concluded that while the club membership services had a nexus with the manufacturing business, the renting of car parking space was also essential for business activities, especially since the cost was included in the final product value.

Issue 2: Nexus of services with manufacturing business.
Regarding the club membership services, the Tribunal found that the membership of IEEMA provided crucial market-related information necessary for business operations, thus falling under the definition of input services. However, the membership of India International Centre lacked a clear nexus with the manufacturing business, leading to the disallowance of Cenvat credit for services related to this club. On the other hand, the renting of car parking space was deemed to have a direct connection with the appellant's business activities, as it was utilized for parking company vehicles. The inclusion of this cost in the final product value further supported the argument that the service was integral to business operations and should be treated as an input service.

Issue 3: Question of limitation regarding Cenvat credit availed.
The appellant raised the issue of limitation, asserting that the department had detected the Cenvat credit availed during an audit where all relevant records were willingly presented. They argued that since they regularly submitted ER-1 returns disclosing credit availed, there was no suppression of information. The Tribunal referenced a judgment to support the appellant's position, stating that the department could only recover ineligible Cenvat credit within the normal limitation period, as the appellant had not violated any legal requirements in their reporting. Consequently, the Tribunal set aside the impugned order, remanding the matter for re-quantification of the Cenvat credit demand and reducing the penalty proportionately to the credit confirmed.

This detailed analysis of the judgment highlights the key issues of eligibility for Cenvat credit, the nexus of services with manufacturing business, and the question of limitation in availing Cenvat credit, providing a comprehensive overview of the Tribunal's decision in the case.