2014 (5) TMI 687 - AT - Service Tax

CENVAT Credit - input services - authorized service station - GTA service, advertisement services, Insurance services, audit fee, Valuation charges, repair and maintenance, AC machine repairing, Courier service etc. - Held that - The respondents are authorized dealer of M/s. FIAT India Pvt. Ltd. engaged in sale of cars and car parts and besides this, they are an authorized service station for servicing of motor vehicles, which is a taxable service. The services, in question, received by the respondent cannot be said to be exclusively used in or in relation to providing the output service, while they would be eligible for Cenvat credit only in respect of those services which are in or in relation to providing their output services of authorized service station. They would not be eligible for Cenvat credit in respect of the value of the services which have been received in connection with their trading activity. We find that this aspect has not been discussed in the impugned order. The impugned order is, therefore, set aside and the matter is remanded to the original adjudicating authority for fresh adjudication after verification as to what extent, the services, in question, have been used in or in relation to the providing of output services of authorized service station by the respondent and Cenvat credit would be available only to that extent. However, as regards the Commissioner (Appeals) s order setting aside the penalty on the respondent under Section 76, since this is dispute regarding availment of Cenvat credit, penalty under Section 76 has called for, and the same has been correctly set aside. The Commissioner of Central Excise (Appeals) s order setting aside the penalty under Section 76 is upheld. - Decided partly in favour of assessee.

Summary

Issues:
1. Eligibility of Cenvat credit for various services received.
2. Imposition of penalties for delay in filing returns and wrong availment of Cenvat credit.

Analysis:

Issue 1: Eligibility of Cenvat credit for various services received

The respondent, engaged in sales and servicing of motor vehicles, had availed Cenvat credit for services like GTA, advertisement, insurance, audit, repair, maintenance, etc. The department contended that these services were not directly related to their output service of servicing cars, hence not eligible for Cenvat credit. The Assistant Commissioner confirmed the demand for Cenvat credit and imposed penalties. On appeal, the Commissioner (Appeals) allowed credit for most services but disallowed it for hotel bills. The Revenue appealed against this decision.

The Tribunal noted that the services received were not exclusively used for the output service. The respondent, as an authorized dealer and service station, could only claim credit for services directly related to their service station activities. The matter was remanded for fresh adjudication to determine the extent of services used for the authorized service station. The penalty under Section 76 was correctly set aside by the Commissioner (Appeals) as it related to Cenvat credit availment.

Issue 2: Imposition of penalties for delay in filing returns and wrong availment of Cenvat credit

The original adjudicating authority had imposed penalties under Rule 15 of the Cenvat Credit Rules and Section 76 of the Finance Act for wrong availment and utilization of Cenvat credit, delay in filing returns, and failure to pay service tax on time. The Commissioner (Appeals) set aside some penalties but upheld the penalty under Rule 15 for wrong availment of credit.

The Tribunal upheld the setting aside of penalties under Section 76 by the Commissioner (Appeals) as it related to Cenvat credit disputes. The matter was remanded for re-quantification of Cenvat credit demand based on the extent of services used for the authorized service station. The penalty under Rule 15 for wrong availment of credit was upheld.

In conclusion, the Tribunal remanded the case for fresh adjudication on the eligibility of Cenvat credit for various services received by the respondent and upheld the penalties imposed for wrong availment of credit while setting aside penalties related to Section 76. The case highlights the importance of correctly determining the eligibility of Cenvat credit based on the nature of services used in relation to the output service provided.