2016 (11) TMI 1217 - AT - Central Excise

CENVAT credit - commercial construction service for Director s bungalow and maintenance of guest house - input services - Held that - I find that providing of service at guest house and repairing service of Director s bunglow cannot be considered to be an input service and eligible to CENVAT Credit in view of the judgment of Hon ble Gujarat High Court in the case of CCE Vs Gujarat Heavy Chemicals Ltd 2011 (5) TMI 132 - GUJARAT HIGH COURT . However, I find that while imposing penalty under Rule 15(2) of CCR,2004 both the authorities below had not allowed the option to discharge 25% of the penalty subject to fulfillment of the conditions laid down under Sec.11AC of CEA,1944. Thus, the Appellant are entitled to discharge 25% of the penalty imposed on them, subject to fulfillment of conditions laid down under Sec.11AC of CEA,1944 in view of the decision of the Hon ble Gujrat High Court in the case of CCE Vs Harish Silk Mills 2010 (2) TMI 494 - GUJARAT HIGH COURT - The matter is accordingly remanded to the Adjudicating Authority to ascertain the eligibility to pay 25% penalty as per judgments in the case of Harish Silk Mills - appeal allowed - decided partly in favor of appellant-assessee.

Summary

Issues:
1. Eligibility of CENVAT Credit on commercial construction service and maintenance of guest house.
2. Imposition of penalty under Rule 15(2) of CCR, 2004.

Analysis:
1. Eligibility of CENVAT Credit on services:
The appeal was filed against the order passed by the Commissioner (Appeals) regarding the eligibility of CENVAT Credit amounting to &8377;2,59,865/- for the period November 2006 to September 2011 on services related to commercial construction for Director's bungalow and maintenance of their guest house. The Appellant contended that these services are related to their business activity and hence qualify as input services under Rule 2(l) of CENVAT Credit Rules, 2004. However, the Hon'ble Gujarat High Court precedent in the case of CCE Vs Gujarat Heavy Chemicals Ltd held that services provided in residential quarters of a manufacturer are ineligible for CENVAT Credit. The Tribunal concurred with this view, stating that services at the guest house and repair of the Director's bungalow do not qualify as input services eligible for CENVAT Credit.

2. Imposition of penalty under Rule 15(2) of CCR, 2004:
The Appellant also challenged the imposition of an equal amount of penalty under Rule 15(2) of CENVAT Credit Rules, 2004. The Tribunal observed that while the penalty was upheld, both the lower authorities failed to consider allowing the Appellant the option to discharge 25% of the penalty as per the conditions under Sec.11AC of Central Excise Act, 1944. Citing judgments in the cases of CCE Vs Harish Silk Mills and CCE Vs G.P.Presstress Concrete Works, the Tribunal directed the Adjudicating Authority to reassess the penalty imposition and ascertain the eligibility of the Appellant to pay only 25% of the penalty as per the mentioned conditions. Consequently, the appeal was partly allowed on this issue.

In conclusion, the Tribunal upheld the denial of CENVAT Credit on the disputed services but directed a reassessment of the penalty imposition to allow the Appellant to discharge only 25% of the penalty amount based on the conditions laid down in the relevant legal provisions and judicial precedents.