2014 (8) TMI 287 - HC - Central Excise

CENVAT Credit - input services - running canteen - recovery of service tax portion from the employees - Held that - At the out-set, it is required to be noted that it has been found that the appellant was recovering the amount from the beneficiaries/ its own employees while running the canteen. Therefore, as such, the appellant was not entitled to Cenvat Credit which was claimed by them on the amount of ₹ 13,27,415/-. Therefore, under the circumstances, when the show-cause notice was issued to reverse the same and accordingly after giving opportunity to the appellant and when it was found that, in fact, an amount of ₹ 13,27,415/- was recovered by the contractor and the same was recovered by the appellant from its employees/beneficiaries, the appellant was not entitled to the Cenvat Credit of the same, no error has been committed in confirming the show-cause notice and making the demand of ₹ 1,59,353/-towards the Cenvat Credit wrongly availed by the appellant. We see no reason to interfere with the impugned judgment and order passed by the learned Tribunal - Decided against assessee.

Summary

Issues:
1. Disallowance of Cenvat Credit on payments made to canteen contractor.
2. Applicability of limitation under sec. 11A of the Central Excise Act.
3. Recovery of Cenvat credit under Rule 14 of the Cenvat Credit Rules, 2004.
4. Recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004.
5. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004.
6. Eligibility of outdoor catering as an input service for availing input service tax credit.
7. Recovery of service tax portion from employees.
8. Consideration of the timeliness of the show cause notice.
9. Imposition of penalty based on the appellant's belief.

Analysis:
1. The appellant, engaged in manufacturing, availed Cenvat Credit on payments to a canteen contractor despite recovering an amount from employees. A show-cause notice demanded recovery under Rule 14 of the Cenvat Credit Rules, 2004. The Tribunal upheld the demand, leading to the current appeal.
2. The appellant contested the applicability of the limitation under sec. 11A of the Central Excise Act, citing a second audit revelation. The Tribunal dismissed this argument.
3. The Tribunal affirmed the demand for recovery under Rule 14 of the Cenvat Credit Rules, 2004, for the period in question.
4. The Tribunal upheld the recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004, along with the principal amount.
5. The Tribunal imposed a penalty under Rule 15 of the Cenvat Credit Rules, 2004, in line with the demand made.
6. The eligibility of outdoor catering as an input service for tax credit was debated, with the appellant claiming entitlement based on employee benefits.
7. The recovery of service tax from employees was a point of contention, with the appellant denying such recovery.
8. The timeliness of the show cause notice was raised as an issue, questioning the Tribunal's oversight in considering the limitation period.
9. The appellant argued against the penalty imposition, citing a genuine belief in compliance, which the Tribunal dismissed.

The High Court upheld the Tribunal's decision on all counts. It found the appellant ineligible for Cenvat Credit due to the recovery from employees, dismissing arguments on limitation, interest, and penalty. The Court emphasized the factual findings and upheld the demand for recovery. The appeal was dismissed, affirming the Tribunal's judgment.