2018 (10) TMI 765 - AT - Service Tax

CENVAT Credit - input services - Professional Charges - Management & Business Consultancy Services - Rent-a-Cab Services - denial of credit on the ground that these are not input services. Professional Charges - Held that - The appellants have availed such services which are necessary for their output services. The credit in respect of Professional Charges to the tune of ₹ 15,450/- is, therefore, allowed. Rent-a-Cab Services - Held that - The appellants have not furnished any evidence to show that the motor vehicles used for such services are capital goods for the service provider. As per the exclusion clause in the definition of input services , the credit availed for Rent-a-Cab Service is not eligible - demand upheld. Local sales - The appellants originally availed credit to the tune of ₹ 2,34,918/- in respect of local sales and it is argued by learned consultant that they have reversed the credit coming to know that such credit is not eligible - Held that - Even though, the appellants contend to have reversed such credit, this is not clearly brought out from the records - the said issue requires verification by the adjudicating authority - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues:
Refund claim denial for unutilized Cenvat credit, disallowance of credit for certain services, imposition of penalties, verification of input services availed.

Analysis:
The case involved an appeal by a 100% Export Oriented Unit (EOU) engaged in Information Technology Services, specifically e-publishing of books, seeking refund for unutilized Cenvat credit for input services. The refund claim was initially sanctioned but later faced a show-cause notice proposing to deny credit for certain services based on ER-2 returns verification. The original authority partially allowed credit, confirmed demand with interest and penalties. The Commissioner (Appeals) set aside part of the demand but confirmed a portion, leading to the current appeal.

The appellant's representative argued the disallowed credits, including Professional Charges and Rent-a-Cab Services. The Professional Charges were for training employees and business strategy consultancy, falling under eligible "input services." Rent-a-Cab Services were availed for employee transport. The appellant had voluntarily reversed the credit for local sales upon realizing the ineligibility during the refund claim process. The appellant contended that interest and penalties on reversed credit were unjustified.

The Authorized Representative supported the original order's findings, emphasizing the lack of evidence for Professional Charges and Rent-a-Cab Services' eligibility. The Commissioner (Appeals) rejected a significant credit amount and remanded part of the issue for further verification. The exclusion clause regarding motor vehicles in the definition of "input services" was highlighted to argue against Rent-a-Cab Services' eligibility.

After hearing both sides, the Judicial Member allowed the credit for Professional Charges but upheld the denial of Rent-a-Cab Services credit due to the lack of evidence on capital goods usage. The issue of local sales credit reversal required further verification by the adjudicating authority. The matter was remanded for verification, with a directive to consider penalties based on the timing of credit reversal. The impugned order was modified to allow credit for Professional Charges and remand the local sales issue for verification, partially allowing the appeal with consequential relief.

In conclusion, the judgment addressed the specific disallowed credits, emphasizing the need for evidence to support input service eligibility. The remand for verification underscored the importance of proper documentation and compliance with input service criteria for Cenvat credit claims.