2015 (5) TMI 842 - AT - Service Tax

CENVAT Credit - input services - whether Packaging Services, Security Services, Telephone Services & Chartered Account Services would be considered as input services for of Lending of trademark to others - Payment of service tax on royalty received as output services - Held that - In the certificate/opinion obtained from Y.J. Trivedi & Co. Patents & Trade Marks Attorney & Advocate, Ahmedabad also no provisions of the Trade Marks Act or any Rules made there under are mentioned under which it is obligatory on the part of the appellant to compulsorily use the Trade Mark himself. Lending its trade mark, getting royalty & paying service tax on the part of appellant should be sufficient to establish that his Trade Mark has been used. Under the present factual matrix it can not be held that packaging Services are availed by the appellant directly for protecting their Trade Mark/Brand Name. Therefore, the packaging Services availed by the appellant has to be considered to have been utilized for making of tea bags and can not be considered to be availed directly or indirectly in maintaining/protection of appellant s Trade Mark. As per Rule 6 (5) of the Cenvat Credit Rules, 2005 full credit of Security Services credit is permissible if, the credit of such services is not exclusively used in relation to exempted goods or providing exempted services. According credit of service tax on security services is correctly availed by the appellant So far as credit of Chartered Accounts Services & Telephone Services is concerned, As no separate figures are available for such services it will be appropriate that appellant only takes proportionate value wise credit on such services used commonly in providing trading activity and providing Intellectual Property Right Services and pay the remaining amounts with interest. So far as invokation of extended period is concerned it is observed that improper credit taken which was detected by the department officers only. At no stage of appellant approached the department for any guidance that there was any confusion in admissibility of credit on the impugned services. Therefore, extended period will be applicable - However, penalties are waived off. - Decided partly in favour of assessee.

Summary

Issues involved: Eligibility of appellant to avail Cenvat Credit under the Cenvat Credit Rules, 2004 on Packaging Services, Security Services, Telephone Services, and Chartered Account Services.

Analysis:

1. Packaging Services: The appellant argued that they availed packaging services to protect their brand name and trade mark, essential for their output service as Intellectual Property Right. They presented legal advice supporting their claim. However, the tribunal observed that the opinion obtained did not specify any obligatory provision requiring the appellant to use the trade mark directly. Therefore, the packaging services were considered to be utilized for making tea bags, not directly or indirectly for maintaining or protecting the trade mark. Consequently, Cenvat credit on packaging services was disallowed.

2. Security Services: According to Rule 6(5) of the Cenvat Credit Rules, 2004, full credit of security services is permissible if not exclusively used for exempted goods or services. The tribunal found that the appellant correctly availed the credit for security services as they met the conditions specified under the rule.

3. Telephone Services & Chartered Account Services: These services were used for both trading activities and providing Intellectual Property Right services. As separate figures were unavailable, the tribunal suggested the appellant take proportionate value-wise credit for these services used commonly in both activities and pay the remaining amounts with interest.

4. Extended Period: The department detected improper credit taken by the appellant, leading to the applicability of the extended period. However, as the appellant had a reasonable case to believe the credit was admissible, penalties were set aside under Section 80 of the Finance Act, 1994. The appellant's appeal was partly allowed based on the observations made.

In conclusion, the tribunal partially allowed the appeal, disallowing Cenvat credit on packaging services but permitting it for security services, while advising proportionate credit allocation for telephone and chartered account services. Penalties were waived due to the appellant's reasonable belief in the admissibility of the credit.