2017 (3) TMI 470 - AT - Service Tax

CENVAT credit - various input services - denial on account of nexus - Held that - services are very much eligible input services for the purpose of Rule 2 (l) ibid, for the reason that they are in the genre of eligible services of which examples have been given in the first part of the said definition and secondly, since none of the services are disbarred in the specific exclusions given in the second half of the definition, subject to such services not being used primarily for personal use or consumption etc - matter remanded for denovo consideration only for the limited purpose for determining whether any of the aforesaid services, which are otherwise eligible for the purposes of Rule 2 (l) ibid, are disbarred for being used primarily used for personal use or consumption . Penalty u/r 15(1) ibid - Held that - the appellant had already reversed/paid ₹ 1,82,913/-, and that in any case, the entire dispute has emanated as account of differences in interpretation of eligibility of the said input services for the purpose of Rule 2 (l) ibid, I am of the considered opinion that no penalty under Rule 15(1) ibid should be imposed on the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Disallowed Cenvat credit for Business Support Service, appeal against recovery and penalty.

Analysis:
The appellant, engaged in providing "Business Support Service," appealed against the disallowance and recovery of Cenvat credit amounting to ?4,13,239 along with interest and penalty under Rule 15(1) of Cenvat Credit Rules, 2004. The Commissioner (Appeals) partially allowed input service credits worth ?1,21,276 but rejected the appeal regarding the remaining credit amount of ?2,91,963, while reducing the penalty to ?50,000. The appellant's consultant submitted details of disputed services, emphasizing their essential nature to the business activities and nexus to output services provided. The appellant argued that services like coffee, tea, food expenses were statutory requirements.

The respondent contended that input services primarily used for personal consumption by employees are disallowed under Rule 2(l) of the Rules. The appellant's purpose for claiming input services was questioned, as indicated in the order of the Commissioner (Appeals). The consultant highlighted that details regarding the type and nature of services availed were not considered in the previous proceedings. After hearing both sides, the Tribunal found the disputed services eligible as input services under Rule 2(l), remanding the matter for further consideration to determine if any services were primarily used for personal consumption.

Regarding the penalty imposed under Rule 15(1), the Tribunal noted that the lower appellate authority had already reduced it to ?50,000. Considering the circumstances and the appellant's actions, including payment and reversal of a significant amount, the Tribunal decided not to impose any penalty, setting aside the penalty ordered by the lower appellate authority. The appeal was allowed based on the above terms, with the Tribunal providing detailed reasoning for its decision and ensuring a fair opportunity for the appellants to present their case.