2017 (12) TMI 507 - AT - Service Tax

Cenvat credit on capital goods - Rule 2(a) of Cenvat Credit Rules, 2004 - Held that - during the material time, defined inputs to mean all goods, except light diesel, high diesel oil, motor spirit, commonly known as petrol and motor vehicles used for providing any output service. Since the definition of input at the material time was broad enough to consider all goods, excepting the exceptions contained therein, Cenvat credit taken on tyres by the appellant should be considered as input for the purpose of availment of Cenvat credit. With regard to taking of 100% credit in the year of receipt of the capital goods, I find that the appellant had submitted the extracts of relevant portion of the ST 3 returns to show that the credit inadvertently taken, has not been utilised for payment of service tax on the output service provided by it. However, since the ST-3 returns have to be verified by the original authority, I remand the matter to him for ascertaining the fact, whether Cenvat credit taken during the relevant period, were actually available in the books for utilization. If the Cenvat credit had not been utilized for payment of service tax on the output service, the interest liability shall not be demanded from the appellant - Appeal is disposed of.

Summary

Issues:
1. Denial of Cenvat credit on tyres received prior to 24.9.2010
2. Interest demand on Cenvat credit amounting to &8377; 40,87,040/- on capital goods
3. Penalty imposition under Rule 15 of the Cenvat Credit Rules, 2004

Analysis:

Issue 1: Denial of Cenvat credit on tyres received prior to 24.9.2010
The appellant argued that tyres are an essential part of dumpers, without which the dumpers cannot be operational, and should be considered as input for Cenvat credit availment. The Tribunal found that the definition of input during the disputed period was broad enough to include all goods except specific exceptions. Therefore, Cenvat credit taken on tyres by the appellant was considered as input for the purpose of availing Cenvat credit.

Issue 2: Interest demand on Cenvat credit on capital goods
The appellant claimed that the Cenvat credit inadvertently taken on capital goods in the year of receipt was not utilized for payment of service tax on output services. The Tribunal remanded the matter to the original authority for verification of the actual utilization of the credit. If the credit was not utilized for service tax payment, interest liability would not be confirmed against the appellant.

Issue 3: Penalty imposition under Rule 15 of the Cenvat Credit Rules, 2004
The appellant argued that penalty cannot be imposed without specific findings by the adjudicating authority regarding fraudulent activities. The Tribunal did not provide a specific ruling on this issue in the summarized judgment.

In conclusion, the Tribunal allowed the appeal, granting the appellant Cenvat credit benefit on tyres and remanding the matter of interest demand on capital goods for further verification. The penalty imposition issue was not addressed explicitly in the summarized judgment.