2014 (9) TMI 778 - AT - Service Tax

Denial of CENVAT Credit - Works contract service - Held that - As regards the demand of service tax for the period on or after 1.6.2007, the activity is liable to service tax under works contract service and, therefore, if the appellant has discharged service tax liability under works contract service , the question of confirmation of the demand would not arise at all once again. The weak observation made in the impugned order is the appellant did not produce the requisite contracts so as to satisfy the adjudicating authority that they were entered into or on after 1.6.2007. This observation of the adjudicating authority is quite naive and cannot be accepted. If the adjudicating authority had any doubt about when the contract was entered into and the works executed, he could have asked the appellant to produce the copies of all the contracts which the appellant, in fact, claims that they have produced before the department. Therefore, this cannot be a ground for demanding service tax without any basis when the liability has in fact been discharged by the appellant. As regards the denial of cenvat credit of ₹ 168.82 crores, from the records it is seen that the appellant has availed only an amount of ₹ 134.26 crores during the impugned period. If that be so, we do not understand how a disallowance of a credit not availed can be made by the Revenue. It is also on record that the appellant has in fact reversed an amount of ₹ 47.62 crores towards the capital goods and GTA and foreign consultancy services which have been appropriated in the impugned order. Therefore, the denial of cenvat credit to the extent of ₹ 168.82 appears to be not based on any documentary evidences. Similarly, the demand of ₹ 90.78 crores being the credit actually utilized is also clearly not sustainable in law inasmuch as the said amount is already included in the cenvat credit disallowed. There cannot be any double demand towards cenvat credit, once by disallowing the entire amount of credit taken and second by a demand of credit utilized. Thus we find that there are a lot of inconsistencies/mistakes committed in the impugned order by the adjudicating authority. Therefore, the matter needs to go back to the adjudicating authority for fresh consideration. Accordingly we remand the matter back to the adjudicating authority. - Decided in favour of assessee.

Summary

Issues:
1. Service tax demand and denial of cenvat credit
2. Recovery of utilized cenvat credit and penalties
3. Confirmation of demands and interest imposition
4. Applicability of abatement under Notification 1/2006-ST
5. Denial of cenvat credit and inconsistencies in the impugned order

Service Tax Demand and Denial of Cenvat Credit:
The judgment pertains to an appeal against an order confirming a service tax demand of Rs. 134.97 crores and denying cenvat credit availment of Rs. 168.82 crores. The appellant, a construction company, contested the demand related to contracts executed before and after 1.6.2007. For contracts post-1.6.2007, where service tax was paid under "works contract service," the demand was deemed unsustainable. The appellant argued that reversal of cenvat credit on capital goods should qualify for abatement under Notification 1/2006-ST, citing relevant legal precedents. The Tribunal found the denial of cenvat credit unjustified and directed submission of contract copies for further review.

Recovery of Utilized Cenvat Credit and Penalties:
The order also included recovery of Rs. 90.78 crores utilized from cenvat credit, penalties, and interest. The appellant contended that the utilized credit was already part of the total cenvat credit disallowed, leading to a double demand. The Tribunal agreed, highlighting inconsistencies in the adjudicating authority's approach and remanded the matter for fresh consideration.

Confirmation of Demands and Interest Imposition:
The appellant challenged the confirmation of demands and interest imposition, presenting documentary evidence to support their claims. The Tribunal noted the lack of basis for demanding service tax when liabilities were discharged and found the adjudicating authority's observations inadequate. The judgment emphasized the need for proper scrutiny of evidence and directed the appellant to provide contract copies for verification.

Applicability of Abatement under Notification 1/2006-ST:
Regarding the denial of cenvat credit under Notification 1/2006-ST, the Tribunal observed discrepancies between the credit availed and disallowed amounts. The appellant's reversal of credit on capital goods and services was not adequately considered, leading to an erroneous denial of credit. The judgment highlighted the importance of documentary evidence in tax assessments.

Denial of Cenvat Credit and Inconsistencies in the Impugned Order:
The Tribunal identified multiple inconsistencies and errors in the impugned order, including unjustified denial of cenvat credit and double demands for utilized credit. Emphasizing the need for a thorough review, the Tribunal remanded the matter back to the adjudicating authority for a fresh assessment. The judgment underscored the importance of proper consideration of documentary evidence and adherence to legal principles in tax disputes.

The appeal was allowed by way of remand, and the stay petition was disposed of, with the matter requiring further review by the adjudicating authority to address the discrepancies and inconsistencies highlighted in the judgment.