2018 (8) TMI 1453 - AT - Service Tax

CENVAT credit on the tippers, during the period April, 2006 to September, 2006 - Held that - The appellant had not declared that they had availed CENVAT credit on tippers, Komatsu PC, Drill Machine, Portable Compressor, etc. - the appellant had been informing the authorities about the availment of CENVAT credit on these kinds of goods and motor vehicles in their monthly returns regularly - the demand is hit by limitation as there is no suppression, mis-statement of facts with an intention to evade duty, while declaring that they availed the CENVAT credit of Central Excise Duty paid on tippers, compressors and other machineries of motor vehicles - demand hit by limitation. CENVAT Credit on tippers, compressors, etc - Held that - Tribunal in the case of Ganta Ramanaiah Naidu 2009 (9) TMI 261 - CESTAT, BANGALORE has specifically held that CENVAT credit on such motor vehicles is excluded from the benefit of CENVAT credit as capital goods - the view expressed by the Bench in the case of Ganta Ramaiah Naidu in identical set of facts for denial of CENVAT credit is a correct view - credit allowed. Demand of CENVAT credit on capital goods for the entire amount as being 100% of the duty paid - Held that - The appellant had not availed the entire CENVAT credit of ₹ 1,96,33,250/- during the period in question. Hence, demanding and confirming the entire amount seems to be incorrect and since this particular plea of the appellant, that they are eligible for 50% of CENVAT credit and balance 50% subsequently is not dealt with by the adjudicating authority in the impugned order, the matter requires re-examination - appeal allowed by way of remand. Demand of Interest - Held that - The interest liability arises on the amount confirmed and upheld i.e., to the tune of ₹ 3,28,80,899/- and reject the prayers of appellant on interest issue. Penalty - Held that - Since the entire issue involved in this case is regarding the interpretation of eligibility to avail CENVAT credit on the tippers which are used for rendering output services, the appellant herein could be under bona fide belief that they are eligible to avail the CENVAT credit - penalties imposed on the appellant are unwarranted and is set aside. Appeal allowed by way of remand.

Summary

Issues:
1. Eligibility of CENVAT credit on motor vehicles for rendering taxable output services.
2. Limitation period for demand of CENVAT credit.
3. Denial of CENVAT credit on capital goods.
4. Interest liability on unutilized credit.
5. Imposition of penalties on the appellant.

Issue 1: Eligibility of CENVAT credit on motor vehicles for rendering taxable output services:
The appellant claimed CENVAT credit on motor vehicles used for providing taxable output services. The lower authorities issued a show cause notice alleging ineligible CENVAT credit. The appellant argued that they are entitled to the credit as the vehicles were essential for their services. The Tribunal found that the appellant regularly informed the authorities about availing such credit in their monthly returns. The demand for the period April 2006 to September 2006 was set aside due to being hit by limitation. However, for subsequent periods, the Tribunal upheld the demands based on previous judgments disallowing CENVAT credit on such motor vehicles as capital goods.

Issue 2: Limitation period for demand of CENVAT credit:
The Tribunal determined that the demand for CENVAT credit for the period April 2006 to September 2006 was time-barred as the appellant had disclosed the availed credit in their returns without any intention to evade duty. Therefore, the demand for this period was set aside. However, demands for subsequent periods were upheld based on the merits of the case.

Issue 3: Denial of CENVAT credit on capital goods:
Regarding the denial of CENVAT credit on capital goods, the Tribunal found discrepancies in the demand raised by the adjudicating authority. The appellant claimed they were entitled to 50% of the credit, but the authority demanded the full amount. The Tribunal remitted this issue back to the authority for a fresh decision following principles of natural justice. The demand for the entire amount was deemed incorrect, and the issue required further consideration.

Issue 4: Interest liability on unutilized credit:
The appellant argued that no interest should be demanded on the unutilized credit. However, the Tribunal disagreed, stating that interest liability arises on the confirmed amount. The appellant's plea on the interest issue was rejected, and interest was upheld on the confirmed amount.

Issue 5: Imposition of penalties on the appellant:
The Tribunal held that the penalties imposed on the appellant were unwarranted as they could have genuinely believed they were eligible for the CENVAT credit. The penalties were set aside, and the adjudicating authority was directed to consider this aspect when reevaluating the issue of CENVAT credit on capital goods.

In conclusion, the Tribunal disposed of the appeal by setting aside the demand for the period April 2006 to September 2006, upholding demands for subsequent periods, rejecting the appellant's plea on interest, and overturning the penalties imposed.