2017 (7) TMI 683 - AT - Service Tax

CENVAT credit - maintenance of separate records in case of taxable as well as exempt goods - the appellants had availed credit of service tax paid on Telephone Bills, Mobile Bills, Motor car servicing bills etc., even though the said documents were in the name of individual by name Shri S. Venkataraman, Partner of the appellant company - the adjudicating authority rejected the credit on this aspect since the appellants were failed to submit any proof to the extent that these phones were used for the services for which they claimed - Held that - the appellants are engaged in the activity of sale of Motor Vehicles which does not come under purview of Service Tax Act. The demand period involved is from October 2007 to March 2011. Prior to the issuance of the N/N. 10/2008-CE (NT) dated 01.03.2008, the service provider was entitled to utilize upto 20% of the common input service credit available towards the tax payable on the output services where the service provider was engaged in providing both taxable and non-taxable services. From 01.04.2008, the appellants are required to opt for either of the options envisaged in Rule 6 (3) of the CENVAT Credit Rules, 2004. As seen from the record, I find that the appellants continued to utilize the credit by calculating 20% of the tax payable irrespective of the factor whether the same is available or not. Since the appellants are engaged in both taxable and non-taxable activity and are not maintaining separate input accounts, the appellants are required to follow sub-rule 3 of Rule 6 of CENVAT Credit Rules 2004. As the appellants have failed to exercise any of the options given under the provisions of law, I cannot extend any benefit to them at this juncture. I also find that the appellants failed to produce sufficient/substantial evidence in support of their contention that the said phones were used exclusively for taxable services viz., business promotion of service of customers as well as sale of vehicles through financiers. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Consideration of plea raised by the appellants regarding the Assistant Commissioner's failure to appreciate certain facts.
2. Maintaining separate computerized accounts for labor charges and the issue of not maintaining separate accounts.
3. Negligible sales follow-up and its consideration.
4. Time-barred show cause notice and invocation of extended period of limitation.
5. Commissioner (Appeals) passing a cryptic order without thorough study of case records.
6. Requirement for the appellant to follow Rule 6(3) of CENVAT Credit Rules, 2004.
7. Utilization of credit for taxable and non-taxable services without maintaining separate input accounts.
8. Failure to produce sufficient evidence regarding the use of phones for taxable services.

Analysis:
1. The appellant raised several pleas, including the Assistant Commissioner's failure to consider certain facts related to service follow-up and maintaining separate computerized accounts for labor charges. However, the Ld. Departmental Representative reiterated the lower authorities' findings.

2. The issue at hand was whether the appellant was required to follow Rule 6(3) of CENVAT Credit Rules, 2004. The appellant, engaged in both taxable and non-taxable activities, failed to maintain separate input accounts. Consequently, they were required to follow sub-rule 3 of Rule 6. The appellant continued to utilize credits without exercising the options given under the law, leading to the rejection of their appeal.

3. The impugned order highlighted the appellant's failure to produce substantial evidence supporting their claim that certain phones were used exclusively for taxable services. The adjudicating authority rejected the credit claimed by the appellant due to the lack of proof regarding the usage of the phones for the services for which credit was sought.

4. The Tribunal found no errors in the factual or legal appreciation of the case. The detailed findings, which were not contested in the grounds of appeal, supported the rejection of the appeal as lacking in merit. The impugned order was upheld as correct and legal, leading to the rejection of the appeal.