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2018 (4) TMI 618 - AT - Service TaxCENVAT credit - Management Consultancy Service - various input services - Insurance - Vehicle repair maintenance - Taxi Hire charges - Telephone Charges - Construction Services - Work Contract - extended period of limitation - penalty. Insurance - Vehicle repair maintenance - credit has been denied as the motor vehicles are capital goods only for providing taxable services - Held that - there is no evidence to substantiate that the payment for the said policy/repair has been made by the appellant. In absence of the same it cannot be ascertained in the services were availed in personal capacity of the employee or for the business - One of the ground of denial of credit is lack of evidence regarding the ownership of the vehicles and use of same for business purpose. No evidence to counter the same has been produced except a bald claim - matter is remanded for fresh adjudication. Policies relating to workmen compensation, etc - denial on the ground that the same are in the name of individuals or the joint venture with Zaidun Leeng and hence the credit is inadmissible - Held that - Credit can be allowed only in the circumstances where the cost of the service has been borne by the claimant as only in those circumstances it will form part of the taxable value - In these circumstances credit in respect of insurance expenses cannot be allowed in absence of evidence that the cost of such insurance is borne by the appellant - matter remanded for fresh adjudication. Hire charges - denial on the ground that the invoices were issued in the name of Zaidun Leeng Sdn Bhd and not in the name of the appellant - Held that - Joint Venture is a separate entity and any service used by such joint venture does not automatically become the service used by the appellants. In such circumstances credit cannot be allowed. However if the cost of such services is borne by the appellants the credit would be admissible - matter remanded for fresh adjudication. Telephone bills, installed in the name of an employee/director - denial on the ground that in terms of Rule 9 of Cenvat Credit Rules, 2004 the Invoice/telephone should be in the name of the appellant to enable them to claim the credit - Held that - the Commissioner has sought evidence and the appellants have not provided any evidence in terms of Rule 9 of the Cenvat Credit Rules - credit cannot be allowed. Construction service - works contract - input services - Held that - the appellants have used the services for the purpose of setting up of office for use in respect of their output service. This fact has not been countered by the Revenue. The definition of input service interalia includes services used in relation to setting up of premises of service provider of output service within its fold - the credit of services used for construction of new office cannot be denied - credit allowed. Liability of service tax - Transactions with the associate enterprises - penalty - Held that - The liability to pay tax arises in respect of the gross amount charged, in terms of Section 67 of the Finance Act, 1994. The time at which the payment is to be made is decided in terms of Rule 6 (1) of Service Tax Rules. In both, the section as well as rules, it has been clarified that any amount credited or debited, as the case may be, to any account, whether called suspense account or by any other name, in the books of accounts shall be liable to tax, where the transaction of taxable service is with any associate enterprises as gross amount charged - the provision of the law are very clear and there is no doubt regarding payment of service tax in respect of transaction with the associate enterprises. Liability of service tax - foreign currency transaction - Held that - the appellants have admitted in their appeal the said tax liability and paid the same along with interest. Penalty - Held that - it would not be correct to say that they had an intention to evade the tax. The appellants have paid the interest as well. In these circumstances imposition of penalty under section 78 cannot be sustained - penalty u/s 76 also waived. Extended period of limitation - Held that - it is apparent that the credit has wrongly been availed and the appellant do not have any evidence of the eligibility in terms of Rule 9 of the Cenvat Credit Rules - This by itself is sufficient to sustain the charge of suppression/misdeclaration - extended period rightly invoked. Appeal allowed in part.
Issues Involved:
1. Confirmation of demand of service tax. 2. Denial of Cenvat Credit. 3. Demand of interest. 4. Imposition of penalties. 5. Invocation of the extended period of limitation. Detailed Analysis: 1. Confirmation of Demand of Service Tax: The appellants argued that the service tax liability on transactions with associate enterprises should not be based on the timing of accounting entries but rather on the actual receipt of payment. The tribunal found that the provisions of Section 67 of the Finance Act, 1994, and Rule 6 of the Service Tax Rules, 1994, clearly state that any amount credited or debited to any account, including suspense accounts, in transactions with associated enterprises is liable to tax. The tribunal upheld the demand for service tax on these grounds, rejecting the appellant's arguments. 2. Denial of Cenvat Credit: - Insurance and Vehicle Repairs & Maintenance: The tribunal noted that the credit was denied due to lack of evidence that the services were used for business purposes and not in a personal capacity. It remanded the matter to the Commissioner for fresh adjudication, allowing the appellants to provide evidence to substantiate their claims. - Taxi Hire Charges: The tribunal held that since the invoices were in the name of a joint venture and not the appellant, the credit could not be allowed unless the cost was borne by the appellants. This issue was also remanded for fresh adjudication with the opportunity for the appellants to provide evidence. - Telephone Bills: The credit was denied because the invoices were in the name of employees or directors rather than the appellant. The tribunal upheld this denial, emphasizing the need for evidence of business use as per Rule 9 of the Cenvat Credit Rules, 2004. - Construction Services and Works Contract: The tribunal found that the services were used for setting up offices, which is included in the definition of input service for the period prior to 2011. Therefore, the credit for these services was allowed. 3. Demand of Interest: The appellants admitted their liability and paid the service tax along with interest for transactions with associate enterprises and foreign parties. The tribunal noted these payments and focused on the correctness of penalties rather than the interest itself. 4. Imposition of Penalties: - Section 78 Penalty: The tribunal found no evidence of intent to evade tax, as the dispute was about the timing of tax payment. Since the appellants had paid the tax and interest, the penalty under Section 78 was not justified. - Section 76 Penalty: The tribunal waived the penalty under Section 76 for the period up to 10/05/2008, relying on a precedent decision. 5. Invocation of the Extended Period of Limitation: The tribunal upheld the invocation of the extended period of limitation for the denial of Cenvat Credit due to the appellants' failure to provide necessary evidence as per Rule 9 of the Cenvat Credit Rules. This failure was seen as sufficient to sustain the charge of suppression or misdeclaration. Conclusion: The appeal was partly allowed. The tribunal remanded several issues back to the Commissioner for fresh adjudication, allowing the appellants to produce evidence to substantiate their claims. The penalties under Section 78 were set aside, and the penalty under Section 76 was waived for the specified period. The tribunal upheld the demand for service tax and the denial of Cenvat Credit where evidence was lacking.
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