2015 (6) TMI 784 - AT - Service Tax

Irregular/ unauthorized availment of Cenvat credit - Charges of no separate accounts maintained while providing both taxable and exempted services - Held that - If there was a doubt either regarding maintenance of separate accounts or utilizing credit on common inputs/input services, as required under Rule 6 (2) of the Cenvat Credit Rules, the authorities ought to have summoned the appellants records or should have verified from the appellant s premises, whether assessee had incorrectly pleaded to have maintained separate records while it did not. In the absence of any such notice issued and in view of the failure to have inspected the appellant s records, law does not authorize a conclusion of non- maintenance of separate accounts, without any basis. There is not a single sentence in the entire adjudication order which records the evidence or material on the basis of which the Adjudicating Authority records the finding that the appellant failed to maintain separate accounts. In the absence of the Adjudicating Authority recording a clear finding that the assessee failed to maintain separate accounts and on the basis of some evidence in support of such conclusion, the inference of a failure to maintain separate accounts, is a finding of fact based on no evidence. It is therefore perverse. On the basis of submission it is contended, that if it was found that the appellant had availed credit on inputs and input services which are common to both taxable and exempted services, the demand should be restricted to ₹ 1,81,386/-, which is the position that obtains on the basis of Okay Glass Industries vs. CCE, Kanpur 2015 (2) TMI 924 - CESTAT NEW DELHI . - Matter remanded back.

Summary

Issues:
1. Availment of Cenvat credit on common inputs for both taxable and exempted services.
2. Failure to maintain separate accounts for taxable and exempted services.
3. Burden of proof on the appellant regarding separate accounts and credit utilization.

Analysis:
1. The appellant was issued a show cause notice for irregular availment of Cenvat credit on common inputs for both taxable and exempted services. The appellant denied these allegations, stating they only availed credit for inputs used in providing taxable services. The impugned order concluded without proper evidentiary analysis that the appellant failed to prove non-availment of credit on common inputs. The Tribunal found this conclusion to be baseless and contrary to the appellant's denial.

2. The Authority alleged that the appellant did not maintain separate accounts for taxable and exempted services, but the appellant disputed this claim and asserted they followed the rules. The Tribunal criticized the Authority for not providing any evidence to support the finding of non-maintenance of separate accounts. The Tribunal emphasized that the burden of proof lies on the Revenue when alleging such violations, and failure to establish this fact renders the conclusion of non-maintenance of separate accounts as baseless and perverse.

3. The appellant argued that even if credit was availed on common inputs, the demand should be limited to the credit used for exempted services only. The Tribunal referred to a previous judgment to support this argument. The Tribunal set aside the impugned order due to the lack of proper reasoning and evidence in the adjudication. It emphasized the importance of recording clear findings based on evidence and remitted the matter back to the respondent for a fresh adjudication order with proper evidentiary basis and observations.

In conclusion, the Tribunal found the impugned order to be unsustainable due to lack of evidence and proper reasoning. The Tribunal highlighted the importance of judicial discipline in recording adjudication orders and directed the respondent to re-examine the matter with a clear evidentiary basis.