2017 (3) TMI 659 - AT - Service Tax

CENVAT credit - goods imported for providing taxable services - Lighting equipments - Gloves and Tissues - whether fall under the definition of capital goods being parts/accessories of capital goods? - Held that - the imported goods fall within the definition of parts and accessories of capital goods - credit allowed - Decided against the revenue.

Summary

Issues: Appeal against setting aside of demand, interest, and penalties imposed on availing CENVAT credit for imported goods used for taxable services.

Analysis:
The appeal was filed by the department challenging the order of the Commissioner (Appeals) that set aside the demand, interest, and penalties imposed on the respondent for availing CENVAT credit on imported goods used for providing taxable services. The department contended that the goods imported by the respondent, including lighting equipment, gloves, and cleaning tissues, did not qualify as capital goods or parts/accessories of capital goods. The department issued a Show Cause Notice proposing disallowance of credit and recovery of the amount availed along with interest and penalties. The original authority confirmed the demand and interest but imposed a penalty, which was later set aside by the Commissioner (Appeals), leading to the department's appeal.

The department argued that the lighting equipment, gloves, and cleaning tissues imported by the respondent were not components/spares or accessories of capital goods. They emphasized that even if these items enhanced the function of capital goods, they needed to be physically added or fitted to be considered accessories. The respondent, on the other hand, contended that the imported goods were specialized accessories essential for cinematographic shooting and the proper functioning of cameras and lighting equipment. The respondent justified the availing of credit based on the specialized nature and purpose of the imported items, which were integral to the provision of their output service.

The Commissioner (Appeals) extensively analyzed the purpose and function of the imported goods, concluding that the lighting equipment, gloves, cleaning tissues, and other items qualified as parts and accessories of capital goods. The Commissioner highlighted that the specialized nature of these goods, specifically designed for cinematographic shooting, made them essential for the effective use of the main capital goods, such as cinematographic cameras. The Commissioner also accepted the argument that items like gloves and cleaning tissues played a crucial role in maintaining the quality and cleanliness of expensive cameras, thus contributing to the overall output service provided by the respondent.

In the final judgment, the Tribunal upheld the decision of the Commissioner (Appeals), dismissing the appeal filed by the department. The Tribunal concurred with the findings that the imported goods fell within the definition of parts and accessories of capital goods, making the availed CENVAT credit admissible. Additionally, the Tribunal noted that the issue of limitation, raised by the respondent regarding the Show Cause Notice, did not require further examination due to the soundness of the Commissioner's decision on the merits of the case. Consequently, the appeal was dismissed, affirming the eligibility of the respondent to avail CENVAT credit on the imported goods used for providing taxable services.