2015 (9) TMI 261 - AT - Service Tax

Benefit of CENVAT Credit of inputs and input services - Various services - Held that - All the services are utilized by appellant in the factory premises and some are indicating the activities relating to the business like sales and marketing. On deeper perusal of the details put-forth by appellant before the adjudicating authority, services are used in or in relation to the manufacture of final products i.e. tractors which are clared on payment of appropriate Central Excise duty, whenever applicable. Service tax paid by the service provider are on the hiring charges on forklift, which were hired out to appellant for movement of materials within the factory premises. Accordingly, we hold that these services as also all other services as enumerated in paragraph 2 herein above are eligible to be availed as input service credit. Since the correct amount is not ascertainable from the show cause notice, we direct the adjudicating authority to workout the exact figure involved in the service of life insurance cover attributable to the family of the employees and direct appellant herein to discharge the said service tax liability along with interest. Though we have upheld this demand, we find that there could be a bonafide impression on the part of the appellant such CENVAT credit is eligible to be availed hence no penalty is required to be imposed, as we set aside major portion of demand, question of imposition of penalties on appellant would not arise. - Decided partly in favour of assessee.

Summary

Issues:
- Disallowance of CENVAT credit on various input services
- Eligibility of CENVAT credit for services used in manufacturing activity
- Disallowance of CENVAT credit on specific services like Life Insurance and renting of Tangible Goods
- Imposition of penalties

Analysis:

Issue 1: Disallowance of CENVAT credit on various input services
The appeals raised the question of disallowance of CENVAT credit on services such as air travel agencies, courier services, management maintenance & repair services, and others. The adjudicating authority confirmed the demands raised, disallowed the credit, and imposed penalties. The first appellate authority upheld the disallowance, leading to appeals before the tribunal.

Issue 2: Eligibility of CENVAT credit for services used in manufacturing activity
The appellant argued that all the disallowed services were used in or in relation to the manufacturing activity. They provided detailed justifications for each service, demonstrating their relevance to the manufacturing process. The tribunal found that the services were indeed utilized in the factory premises and related to business activities like sales and marketing. Citing precedents, the tribunal held in favor of the appellant, allowing the CENVAT credit for the mentioned services.

Issue 3: Disallowance of CENVAT credit on specific services
Regarding specific services like Life Insurance and renting of Tangible Goods, the tribunal found that the portion of service tax paid on Life Insurance for family members of employees was ineligible for credit. However, the credit for services like renting of tangible goods was deemed eligible as they were directly related to the manufacturing process within the factory premises.

Issue 4: Imposition of penalties
As the tribunal upheld the demand related to Life Insurance services for family members, it directed the adjudicating authority to calculate the exact amount involved and asked the appellant to discharge the service tax liability with interest. However, considering the genuine belief of the appellant in availing the credit, the tribunal decided not to impose penalties due to setting aside a major portion of the demand.

In conclusion, the tribunal allowed the CENVAT credit for most of the disputed services, upheld the disallowance for Life Insurance services related to family members, and waived penalties due to the appellant's genuine belief.