2008 (9) TMI 117 - AT - Service Tax

Availment of credit of excise duty paid on the inputs, capital goods and the input services utilized for providing output port, storage & warehousing services, cargo handling services service tax paid on mobile phone, rent a cab, CHA & Surveyor charges and professionals are eligible for input credit - Air-conditioners are eligible for capital goods credit - cement and steel used in constructing storage tank, but not used in providing the port service, so not eligible for credit

Issues Involved:
1. Availment of CENVAT credit on inputs (cement and steel) used for construction of port facilities.
2. Availment of CENVAT credit on service tax paid for various services (mobile phones, CHA and surveyor charges, rent-a-cab, club house fees, professional charges).
3. Availment of CENVAT credit on duty paid for air-conditioners.
4. Imposition of penalty equivalent to the duty amount.

Issue-wise Detailed Analysis:

1. Availment of CENVAT Credit on Inputs (Cement and Steel):
The appellants argued that cement and steel used for constructing port facilities such as jetties and storage tanks are essential for providing port services, storage, and warehousing services. They contended that these materials should be considered necessary inputs eligible for CENVAT credit. They cited Supreme Court decisions advocating a liberal interpretation of "used for providing output services." The adjudicating authority had disallowed this credit, arguing that cement and steel are not directly used for providing output services and are used in immovable property construction, which does not qualify for CENVAT credit under the definitions provided in Rule 2(a) and Rule 2(k) of the CENVAT Credit Rules.

The Tribunal concluded that the definition of "input" for service tax purposes (Rule 2(k)(ii)) is more restrictive than for excise duty purposes (Rule 2(k)(i)). Cement and steel used for construction by a contractor are not directly used for providing port services but for constructing the facilities, which is a separate service category. Therefore, the Tribunal upheld the disallowance of CENVAT credit on cement and steel.

2. Availment of CENVAT Credit on Service Tax Paid for Various Services:
The Tribunal examined the eligibility of credit for service tax paid on mobile phones, CHA and surveyor charges, rent-a-cab, club house fees, and professional charges. It referred to previous Tribunal decisions that allowed credit for service tax on mobile phones. It also recognized that CHA and surveyor services, rent-a-cab services for port officers, and professional charges are integrally connected with providing port services and thus eligible for credit. However, it disallowed credit for club house fees, as these are for worker recreation and not related to providing output services.

3. Availment of CENVAT Credit on Duty Paid for Air-Conditioners:
The appellants argued that air-conditioners fall under Chapter 85 of the Central Excise Tariff Act and should be considered capital goods eligible for credit. The Tribunal agreed, citing decisions that supported the eligibility of air-conditioners as capital goods, and allowed the credit.

4. Imposition of Penalty:
The Tribunal found that the issue involved a bona fide dispute and interpretation of legal provisions, with no malafide intent by the appellants. The credit was availed in statutory records with due intimation to authorities. Consequently, the Tribunal set aside the penalty imposed on the appellants.

Conclusion:
The Tribunal upheld the disallowance of CENVAT credit on cement and steel but allowed credit for service tax on mobile phones, CHA and surveyor charges, rent-a-cab services, and professional charges. It disallowed credit for club house fees and allowed credit for duty paid on air-conditioners. The penalty imposed was set aside due to the bona fide nature of the dispute.

(Pronounced in court on 30.9.2008.)

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