2015 (12) TMI 673 - AT - Service Tax

Disallowance of CENVAT Creit - use of input services for taxable and trading activity - Recovery of tax u/s 73 - Held that - Major activity of the appellant was sale of motor vehicles and providing services incidental to that. They have not maintained separate record for sale of vehicles as well as for providing authorized service station. As per discussion above, it has clearly come out that most of the input service credit taken by them related to the activities of the sale of vehicles. There are a few activities out of which some proportion of the service has been used for repairing or maintenance but it has come out that no separate record in this regard have been maintained. This matter has been examined by the Commissioner (appeal) in his order in detail at para 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10 and 5.11. It was also placed before the Bench that wrong availement of input service credit came to the notice of department only when the detailed audit of the Unit was undertaken. But for audit, wrong availement could not have been detected. - Decided against assessee.

Summary

Issues:
1. Disallowance of service tax credit and recovery under section 73 of the Finance Act.
2. Waiver of penalty under section 76 of the Finance Act.
3. Disallowance of credit on various services for authorized service station.
4. Lack of separate record maintenance for sale of vehicles and service station activities.
5. Failure to produce documentary evidence for proportional credit claim.

Analysis:

1. The appellants appealed against the Commissioner (appeal)'s order that disallowed service tax credit of Rs. 1,64,867 and ordered recovery under section 73 of the Finance Act, along with interest under section 14 of the CENVAT Credit Rules, 2004. The Commissioner also imposed penalties under sections 76 and 67 of the Finance Act. The appellants were engaged in providing taxable services as an authorized service station. The Adjudicating Authority disallowed certain credits and ordered recovery, including penalties.

2. The counsel for the appellants argued that they should have been granted proportional credit for items used in the services for the authorized service station. It was acknowledged that without audit, the voluminous credit availed by the appellants would not have come to the department's notice. The waiver of penalty under section 76 of the Finance Act was a point of contention.

3. The Departmental Representative (DR) reiterated the facts from the Order-in-Appeal, highlighting discrepancies in the appellants' credit claims for various services related to the authorized service station. The DR pointed out that certain services like advertising and courier services were not directly related to the authorized service station activities. The appellants failed to produce supporting documents for their claims, leading to the disallowance of credits on these services.

4. The judgment examined the lack of separate record maintenance by the appellants for the sale of vehicles and the authorized service station activities. It was noted that most of the input service credit claimed by the appellants was related to vehicle sales activities rather than service station operations. The Commissioner's detailed analysis in the order highlighted specific discrepancies in credit claims for different services used by the appellants.

5. Ultimately, the judgment rejected the appeal, citing the lack of documentary evidence to support the appellants' claim for proportional credit. The decision was based on the totality of facts presented, including the failure to produce necessary documentation before the Commissioner (appeal). The appellants' plea for proportional credit was not accepted due to the absence of supporting evidence.

In conclusion, the judgment upheld the disallowance of service tax credit, recovery under the Finance Act, and penalties imposed on the appellants, emphasizing the importance of maintaining accurate records and providing documentary evidence to support credit claims in tax matters.