2018 (2) TMI 1258 - AT - Service Tax

Demand of interest - whether the respondent is liable to pay interest on Cenvat Credit which was taken by the appellant but reversed subsequently? - Held that - the issue has come up before the Hon ble High Court of Karnataka in the case of CCE, Bangalore Vs. Bill Forge Pvt. Ltd 2011 (4) TMI 969 - KARNATAKA HIGH COURT , where it was held that The liability to pay interest would arise only when the duty is not paid on the due date. If duty is not payable, the liability to pay interest would not arise - since the credit which has been taken by the respondents has not been utilized before the same has been reversed, we find no merit in the view of Revenue that interest is payable. Valuation - includibility - various expenses incurred by the respondent towards telephone, insurance, freight, courier etc - Held that - The fact whether certain services are eligible for Cenvat Credit as input service is to be determined on the basis of definitions in the Cenvat Credit Rules, 2004. There is no justification for adding the value of such input services in the total assessable value for payment of service tax only for the reason that such Cenvat Credit have been taken. Business Auxiliary Service - target incentives - Held that - the issue already stands settled in favour of the respondent in the case of Sharyu Motors V/s CST, Mumbai 2015 (11) TMI 229 - CESTAT MUMBAI , in which an identical issue has come up and the Tribunal, where it was held that Service Tax liability confirmed against the appellant on the amount received as incentive for achieving the targets under Business Auxiliary Services is unsustainable and liable to be set aside - demand set aside. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Liability to pay interest on reversed Cenvat Credit.
2. Inclusion of various expenses in the value of taxable service for payment of Service Tax.
3. Taxability of target incentives received under Business Auxiliary Service.

Analysis:

1. Liability to pay interest on reversed Cenvat Credit:
The Revenue contended that interest on the reversed Cenvat Credit should be paid as per Board's clarification and Apex Court's decision. However, the Tribunal referred to Rule 14 of the CENVAT Credit Rules, 2004 and the judgment of the Hon'ble High Court of Karnataka in a similar case. The Tribunal concluded that since the credit was not utilized before reversal, no interest is payable on the reversed Cenvat Credit.

2. Inclusion of various expenses in the value of taxable service:
The Revenue argued that expenses like telephone, insurance, freight, etc., should be included in the value of taxable service for payment of Service Tax based on a CBEC Circular. However, the Tribunal found that the Revenue's approach of adding all expenses to the value of taxable service solely based on claiming Cenvat Credit was unjustified. The Tribunal emphasized that eligibility for Cenvat Credit as input service should be determined as per Cenvat Credit Rules, 2004, and rejected the Revenue's demand for including such expenses in the taxable value.

3. Taxability of target incentives under Business Auxiliary Service:
The Revenue insisted on taxing target incentives received as Business Auxiliary Service. Nevertheless, the Tribunal referred to a precedent where a similar issue was settled in favor of the respondent. The Tribunal highlighted that incentives for achieving sales targets are akin to trade discounts and not Business Auxiliary Services. Citing the precedent's reasoning, the Tribunal dismissed the Revenue's claim for taxing target incentives under Business Auxiliary Service.

In conclusion, the Tribunal upheld the impugned order, dismissing the Revenue's appeal based on the detailed analysis and legal reasoning provided for each issue. The judgment provides a clear interpretation of relevant laws and precedents, ensuring a fair and just decision in the matter.