2016 (3) TMI 105 - AT - Service Tax

Disallowance of Cenvat credit in excess of 20% - Common Input services - Appellants were providing taxable services as well as some exempted services - Separate accounts in respect of credits attributable to taxable as well as exempted services not maintained - Held that the service tax paid on input service other than common services like MTNL Telephone, Chartered Accountant Service, Equipment Hiring etc. is solely attributable to and used in providing taxable services rendered by the appellant. There is no prescribed proforma for maintenance of separate accounts. It will be sufficient if from the records of the appellant/assessee it can be clearly established that the accounts maintained will indicate the utilization of input services credit on which is availed are attributable directly to taxable services only; then such accounts will satisfy the requirement of separate account. The appellants have reversed input of service credit taken on all common services and There is no other evidence to show certain other services were also common for which the appellants have not reversed the credit. - Decided in favour of appellant with consequential relief

Summary

Issues:
1. Denial of Cenvat credit in excess of 20% due to lack of separate accounts for taxable and exempted services.

Analysis:
The appeal in question challenges the order of the Commissioner (Appeals) regarding the denial of Cenvat credit exceeding 20% to the appellants, who are engaged in providing video tape production services taxable under the Finance Act 1994. The dispute arose as the appellants did not maintain separate accounts for credits related to taxable and exempted services. The Original Authority disallowed Cenvat credit amounting to Rs. 2,41,978 and imposed a penalty, which was partially set aside by the Commissioner (Appeals). The appellant contended that the majority of their input services were directly linked to taxable output services, with only a minimal amount attributable to exempted services. They argued that their maintained accounts and submitted invoices adequately demonstrated the attribution of credits to taxable output services. The appellant emphasized the absence of a prescribed format for separate account maintenance and deemed the denial of credit exceeding 20% as unjustified.

The Department, represented by the learned AR, maintained that the appellant failed to provide clear accounts justifying the segregation of input services used for taxable versus exempted services. However, upon evaluating both arguments, the Tribunal focused on determining whether the denial of credit exceeding 20% was warranted. It was noted that common input services contributing to a minimal credit amount had already been reversed by the appellants. The Tribunal acknowledged that there was no specified format for separate account maintenance and emphasized that the accounts should clearly indicate the utilization of input services solely for taxable services. Additionally, the appellants had reversed credits on all common services, indicating compliance with the requirement. The Tribunal concluded that the appellants' records sufficiently demonstrated the attribution of input services to taxable output services, thereby allowing the appeal and providing consequential relief if applicable.