2018 (7) TMI 1600 - AT - Service Tax

CENVAT Credit - input services - rent-a-cab service - health insurance service - interior decorator service - denial on account of nexus - Held that - The appellant had accepted that CENVAT Credit availed on services such as rent-a-cab service, health care service and interior decorator service were ineligible to be availed as CENVAT Credit - As stated by the appellant, when the Purchase Orders were issued from the Kolkata office, the invoices should have been addressed to the Kolkata office - the cenvat invoices should be verified and the matter should be decided accordingly. Penalty u/s 78 - Held that - There is no material on record to establish fraud, collusion, willful misstatement or suppression of facts on the part of the appellant - penalty u/s 78 of the Finance Act is unwarranted and is set aside. The matter is remanded to the Adjudicating Authority for verification of the documents and to pass order in accordance with law - appeal allowed by way of remand.

Summary

Issues:
CENVAT credit availed on ineligible services - Error or mala fide intent - Section 73(3) of the Finance Act - Purchase Orders and invoice submission logistics - Invocation of extended period of limitation - Input Service Distributor concept - Verification of CENVAT invoices - Penalty under Section 78 of the Finance Act - Fraud, collusion, willful misstatement, suppression of facts.

Analysis:
The case involves the appellant, formerly known as Lafarge India Limited, engaged in cement manufacturing, facing a challenge regarding the availing of CENVAT Credit on various services not related to the final product or output service. The department alleged that the appellant took credit on services like rent-a-cab, health insurance, and interior decoration, which were deemed ineligible. The appellant paid a certain amount post-audit observations and received a Show Cause Notice for recovery of CENVAT Credit availed. The adjudicating authority confirmed the demand, imposed a penalty, and the Commissioner (Appeals) upheld the order, leading to the present appeal.

The appellant contended that the CENVAT Credit availed on ineligible services was due to an error, not mala fide intent, citing Section 73(3) of the Finance Act regarding pre-show cause notice tax payment. They explained that logistical convenience led to invoices being submitted in Mumbai despite Purchase Orders from Kolkata. The appellant challenged the invocation of the extended period of limitation by the adjudicating authority.

The Revenue supported the lower authorities' findings, leading to a hearing where both sides presented their arguments. The Tribunal observed that the appellant accepted the ineligibility of CENVAT Credit on certain services due to logistical issues with invoice submission. The Commissioner (Appeals) emphasized the Input Service Distributor concept, highlighting the need for proper credit distribution based on documents. The Tribunal stressed the importance of verifying CENVAT invoices for accurate decision-making.

Regarding the penalty under Section 78 of the Finance Act, the Tribunal referenced a Gujarat High Court judgment emphasizing the need for evidence of willful misstatement, suppression, fraud, or collusion to impose a penalty. Finding no such evidence against the appellant, the Tribunal set aside the penalty, remanded the matter for document verification, and granted a reasonable opportunity for both parties to present evidence. The impugned order was modified, and the appeal was disposed accordingly, emphasizing fair verification and due process.