2015 (4) TMI 575 - AT - Service Tax

Cenvat Credit - Practicing Chartered Accountant service - Assessee provided taxable as well as non taxable service - Non maintenance of separate accounts - whether the appellant are required to pay 6% /8% of the value of exempted services under rule 6(3)(i) or they may be allowed to make the payment under Rule 6(3)(ii) - Held that - No assessee would intentionally evade payment of ₹ 927/-. The appellant have pleaded ignorance about the new provisions and continued to restrict utilisation of CENVAT credit to the tune of 20% as per previous provisions of law. In any case Rule 6(3) only restricted availment of credit upto 20%. If did not make the credit lapse. Further, the restriction of 20% was removed from 01.04.2008. Therefore, I set aside the demand of ₹ 26,487/-. Levy of penalty - Held that - the mens rea with definite intent to evade duty is not established - No penalty. Admissibility of CENVAT Credit on insurance, repair and maintenance of motor vehicles. - Commissioner appears to contradict his own statement. On the one hand he says the expenditure has been incurred from the firm s budget whereas on the other hand he comes to a conclusion that no documentary evidence showing use of vehicles for output services, has been produced. - it was never the allegation in the show-cause notice that the vehicles are not use for providing output services. The allegation in the show-cause notice is vague as is states that the insurance & maintenance of motor vehicle on which the Service Tax credit is availed appears to be not input services and therefore credit of the same is inadmissible as per provision of CENVAT credit Rules, 2004. The allegation in the show-cause notice is not definitive nor substantiated in any manner - CENVAT credit is admissible - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant is required to pay 6% /8% of the value of exempted services under rule 6(3)(i) or allowed to make the payment under Rule 6(3)(ii).
2. Admissibility of CENVAT Credit on insurance, repair, and maintenance of motor vehicles.

Analysis:

Issue 1:
The appellant, a partnership firm of Chartered Accountants, utilized CENVAT credit on input services without maintaining separate accounts for taxable and exempted services as required under Rule 6(2) of the CENVAT Credit Rules. The dispute arose regarding the payment of 6% /8% of the value of exempted services under rule 6(3)(i) or Rule 6(3)(ii). The appellant argued that they paid a proportionate amount of CENVAT credit before the show-cause notice was issued and were unaware of the amended Rule 6(3A). The Tribunal found that the appellant did not fulfill the conditions of Rule 6(3A) but acknowledged the payment made before the notice. It was held that enforcing a large amount due to a minor procedural lapse would be harsh. The Tribunal set aside the demand, stating that mens rea to evade duty was not established, thus penalty under Rule 15(3) was not sustainable.

Issue 2:
Regarding the admissibility of CENVAT Credit on insurance, repair, and maintenance of motor vehicles, the Commissioner acknowledged the vehicles as assets used for business purposes. However, the Commissioner questioned the lack of documentary evidence showing the vehicles were used for output services only. The Tribunal disagreed with the Commissioner's finding, noting that the allegation in the show-cause notice was vague and unsubstantiated. It was held that the credit was admissible, and the penalty under Section 77 was set aside. The impugned order was set aside, and the appeal was allowed with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, setting aside the demand and penalties, and allowing the appeal with consequential relief.