2014 (8) TMI 622 - AT - Service Tax

Cenvat Credit - input services - order beyond the scope of show-cause notice - Intellectual property service - Whether, the respondents are doing the transportation of goods from the premises of the licensees to the dealers of the branded goods for promotion of the brand name - Held that - The adjudication order denies credit for the reason that transportation is not an input service for providing intellectual property service and thus the adjudication order has travelled beyond the scope of show-cause notice. In fact the order of the Commissioner (Appeal) has set aside the adjudication order for this reason as seen from the last but one paragraph and other paragraphs of the many unnumbered paragraphs in the order-in-appeal. The Revenue has filed this appeal challenging this finding of the Commissioner (Appeal) - even though the word utilization has been used in the show-cause notice, the issue of eligibility is part of the issue of utilization. If credit is taken for ineligible credit, then its utilization is not proper. The argument canvassed by the respondent is a hyper technical argument. Further the eligibility for credit is a legal argument which can be taken at any stage of the proceedings. At the same time the respondent has to get an opportunity to argue this point and there has to be clear decision on the issue after statement of facts clearly. The impugned orders of the lower authorities are not maintainable and the issue needs to be decided afresh stating all facts clearly without giving any room for doubts on facts in question and issues in question. So the impugned order is set aside and the matter is remitted to the adjudicating authority for a denovo adjudication after giving opportunity for the respondents to make his submissions on the eligibility to credit. - Matter remanded back - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of utilization of credit in service tax on transportation of goods.
2. Eligibility of transportation as an input service for providing intellectual property service.

Analysis:

Issue 1: Interpretation of utilization of credit in service tax on transportation of goods:
The case involves a dispute regarding the utilization of credit for service tax on transportation of goods. The show-cause notice raised concerns about the utilization of credit but not the eligibility for taking credit. The Commissioner (Appeal) set aside the adjudication order as it exceeded the scope of the show-cause notice. However, the Tribunal disagreed with this finding, emphasizing that eligibility is a part of utilization. The show-cause notice explicitly stated that transportation of goods cannot be treated as an input service for providing intellectual property service. The Tribunal considered the argument against this as hyper-technical and highlighted that eligibility for credit is a legal issue that can be raised at any stage. Therefore, the matter was remitted for fresh adjudication to clarify all facts and issues without any ambiguity.

Issue 2: Eligibility of transportation as an input service for providing intellectual property service:
The core question revolved around whether the transportation of goods by the respondents from the licensees' premises to the dealers for brand promotion qualifies as an input service for intellectual property service. The contract terms with the licensees were deemed crucial in determining this eligibility. The Tribunal stressed the importance of clarifying who bears the freight costs in this process. The Tribunal allowed the appeal by setting aside both the impugned order and the adjudication order, remitting the case for a fresh adjudication to address all relevant facts and issues comprehensively.

In conclusion, the Tribunal's decision focused on the interpretation of credit utilization in service tax on goods transportation and the eligibility of transportation as an input service for intellectual property service. The case was remitted for a thorough reconsideration to ensure clarity on all aspects and to allow the parties to present their arguments effectively.