2016 (9) TMI 91 - AT - Central Excise

Cenvat credit - Catering Services and Tour Operator (Bus) services - part of an amount was recovered from the employees - Held that - the issue is no longer res integra as the judgements in the case of M/s. Ultratech Cement 2010 (10) TMI 13 - BOMBAY HIGH COURT , wherein it was held that once the Service Tax is borne by the ultimate consumers of the service, namely, the worker, the manufacturer cannot take credit of that part of the service tax, which is borne by the consumer, M/s Castrol India Ltd. 2015 (9) TMI 1335 - CESTAT MUMBAI and Cema Electric Lighting Products India P. Ltd. 2013 (4) TMI 328 - CESTAT AHMEDABAD have held in favour of Revenue. The argument that there is no restriction in the Cenvat Credit Rules, 2004 does not come to the rescue of the appellant as the law is already settled. Since they have taken inadmissible credit, the penalty under Rule 15(1) of Cenvat Credit Rules, 2004 which does not require the presence of mens rea is also upheld. - Decided against the appellant

Summary

Issues: Admissibility of CENVAT credit on 'Catering Services' and 'Tour Operator' services where part of the amount was recovered from employees.

Analysis:
1. The appeal challenged the inadmissibility of CENVAT credit amounting to ?2,89,789/- taken by the appellant due to recovery from employees. A penalty of ?2,000/- was also imposed under Rule 15(1) of Cenvat Credit Rules, 2004.

2. The appellant's advocate argued that there were separate contracts with the canteen contractor and the employees, emphasizing no restriction in the Cenvat Credit Rules, 2004 on amounts recovered from staff members. However, he acknowledged that the entire demand was linked to employee recoveries.

3. The Revenue's representative cited the judgment of the Hon'ble Bombay High Court in Commissioner of Central Excise Nagpur vs. Ultratech Cement Ltd., emphasizing that the manufacturer cannot claim credit for the part of service tax borne by the consumer. Additional reliance was placed on Tribunal judgments in various cases.

4. The Tribunal, after reviewing submissions and precedents, concluded that the issue of admissibility of credit when amounts were recovered from employees was settled by previous judgments favoring the Revenue. The absence of a restriction in the Cenvat Credit Rules, 2004 did not support the appellant's case. Consequently, the inadmissible credit and the penalty under Rule 15(1) were upheld.

5. Ultimately, the appeal was dismissed, with the operative part pronounced in court. The decision reinforced the principle that inadmissible credits, even without mens rea, would not be allowed under the Cenvat Credit Rules, 2004.