2018 (10) TMI 548 - AT - Service Tax

CENVAT Credit of CVD paid - capital goods/inputs used for providing output services - import of chassis on payment of applicable customs duty, procured kit buckets, cylinders etc. and other body building material and assembled the same at their site as tippers and dumpers and used the same for the purpose of transportation of overburden - denial of credit on the ground that these vehicles are motor vehicles and cannot be considered as capital goods or inputs - Held that - Identical issue decided in the case of GANTA RAMANAIAH NAIDU VERSUS COMMISSIONER OF CENTRAL EXCISE, GUNTUR 2009 (9) TMI 261 - CESTAT, BANGALORE , where it was held that duty paid on motor vehicles cannot be considered as eligible CENVAT credit under capital goods or under inputs - credit rightly denied. CENVAT Credit - duty paying documents - invalid documents - Held that - The issue needs reconsideration by the adjudicating authority as random sample documents produced before us indicate that appellant may be able to justify their contention that they are eligible for the CENVAT credit - matter on remand. As regards CENVAT credit availed in excess of 50% of the capital goods of an amount of ₹ 29,08,122/- there are no merits in the contentions raised by the learned counsel that this amount is included in the amount of CENVAT credit denied and is upheld. CENVAT credit of cess availed by the appellant - Held that - On perusal of CENVAT Credit rules, it is found that it does not contemplate for availment of CENVAT credit of motor vehicle cess - demand upheld. Confiscation of tippers and spare parts - Redemption fine - Held that - Such confiscation is unwarranted as the appellant during the relevant period may have entertained a bonafide belief that since the said tippers after assembly were used for rendering taxable output service, they are eligible for CENVAT credit - confiscation and redemption fine set aside. Penalty u/r 15 - Held that - There could be a bonafide impression that any inputs or input services or capital goods used for providing output services were eligible for CENVAT credit, which was an industry norm and had to be decided by the Tribunal in the case of Ganta Ramanaiah Naidu - issue being contentional, penalty not warranted. Appeal allowed in part.

Summary

Issues:
1. Eligibility of CENVAT credit on chassis, bodies, and spare parts for tippers.
2. Availment of CENVAT credit without valid documents.
3. CENVAT credit availed in excess of 50%.
4. CENVAT credit of cess availed.
5. Confiscation of tippers and spare parts.
6. Penalty imposed under Rule 15 of the CENVAT Credit Rules.

Detailed Analysis:
1. The main issue in this case was the eligibility of CENVAT credit on chassis, bodies, and spare parts for tippers used in transportation activities. The appellant argued that these items were essential for their service of transporting overburden and should be considered as inputs. However, the Tribunal, citing previous decisions, held that duty paid on motor vehicles cannot be considered eligible for CENVAT credit under capital goods or inputs. Therefore, the CENVAT credit on chassis and bodies for tippers and spare parts for Volvo tippers was correctly denied.

2. Another issue raised was the availment of CENVAT credit without valid documents. The adjudicating authority had not given the appellant an opportunity to produce the required documents. The Tribunal remanded this issue back to the authority for reconsideration after the appellant is given a chance to provide the necessary documents.

3. The appellant contested the CENVAT credit availed in excess of 50%, arguing that this amount was already included in the denied credit. The Tribunal agreed with this argument and set aside the confirmed CENVAT credit of the excess amount.

4. Regarding the CENVAT credit of cess availed by the appellant, the Tribunal found that the rules did not allow for the credit of motor vehicle cess. Therefore, the CENVAT credit availed on motor vehicle cess was held to be incorrect and was confirmed.

5. The issue of confiscation of tippers and spare parts was also addressed. The Tribunal determined that the confiscation was unwarranted as the appellant had a genuine belief that they were eligible for CENVAT credit. Therefore, the confiscation was set aside, along with the redemption fine imposed.

6. Lastly, the penalty imposed under Rule 15 of the CENVAT Credit Rules was reviewed. The Tribunal considered the industry norm during the relevant period and the decision in a similar case, where penalties were set aside. Following this precedent, the penalties imposed in this case were also set aside.

In conclusion, the appeals were partly allowed and partly rejected based on the issues discussed and the Tribunal's findings.