2019 (11) TMI 1618 - AT - Central Excise

CENVAT Credit - Advocate s Fees - consultancy charges - club membership expenses - reversal of CENVAT Credit - suppression of facts or not - penalty - HELD THAT - The issue is no longer res-integra and is squarely covered by the decision of the Tribunal in M/S SUNDARAM CLAYTON LTD. VERSUS CCE CHENNAI - II 2016 (6) TMI 161 - CESTAT CHENNAI wherein it was held (e ) Legal services are availed for statutory compliance which is the duty of the assessee to comply and the credit cannot be denied for such services since it has relevancy to the activity of manufacture. Once there is legal obligation and the assessee has to discharge the same irrespective of the manufacture being done but business to be carried out cenvat credit of service tax paid on such count is undeniable. - the Cenvat Credit on legal charges and consultancy charges cannot be denied to the Appellant and thus the demand on that score is set aside. Club membership subscription - HELD THAT - It is seen that the said expense is not in direct relation to the business of the Appellant but for personal use of the director of the Appellant and thus the said Credit cannot be allowed under Rule 2(l) of the CCR 2004. Hence the amount of 612/- is liable to be reversed. Reversal of CENVAT Credit - HELD THAT - The contention of the Appellant that the Appellant followed the procedure laid down in Rule 6(3)(b) of the CCR 2004 for proportionate reversal of Cenvat credit during the said period which is also verified by the submissions and calculations produced by the Appellant on this score it is held that the Appellant cannot be asked to reverse again what the Appellant has already reversed under the said Rule 6 of CCR 2004. Penalty - HELD THAT - The department has not established any suppression of facts by the Appellant and thus the penalty imposed is set aside. Appeal allowed.

Summary

Issues:
1. Confirmation of demand of irregular Cenvat Credit of Service Tax on consultancy charges, membership of club, legal services, etc.
2. Applicability of Cenvat Credit Rules, 2004.
3. Proportionate reversal of Cenvat Credit under Rule 6(3)(b) of the CCR, 2004.
4. Imposition of penalty.

Analysis:
1. The appellant contested the demand of irregular Cenvat Credit on various services, arguing that the expenses were directly related to business activities and not excluded under Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant relied on tribunal decisions supporting their stance. The Tribunal found that legal services and consultancy charges are essential for statutory compliance and business activities, thus allowing Cenvat Credit on these expenses. However, club membership expenses, deemed for personal use of the director, were disallowed under Rule 2(l) of the CCR, 2004, and an amount of ?612 was directed to be reversed.

2. The appellant claimed to have followed the proportionate reversal procedure under Rule 6(3)(b) of the CCR, 2004, and had already reversed 98% of the total credits for the relevant financial year. The Tribunal held that the appellant should not be required to reverse what was already compliantly reversed under the said rule.

3. The Tribunal observed that there was no evidence of suppression of facts by the appellant, leading to the setting aside of the penalty imposed by the Adjudicating Authority. The decision was based on the appellant's regular availing of credit without any suppression. Consequently, the appeal was allowed, with the appellant entitled to consequential benefits as per the order.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision on each matter, preserving the legal terminology and significant phrases from the original text.