2018 (12) TMI 1041 - AT - Service Tax

CENVAT Credit - common input services which were used for both taxable and exempted services - Rule 6(3) of CCR 2004 - Held that - As far as the services utilised in the Corporate Office on which they have taken the credit is concerned, there cannot be separate records for different projects (exempted and taxable). Therefore, the appellant had an option under Rule 6(3) of either reversing the proportionate amount of credit or paying 6% of the value of the exempted projects - impugned order upheld. As far as other demands confirmed in the impugned order are concerned, the appellant concedes the same. Penalties - Held that - It is clear that the appellant has declared that they have maintained separate records in their return whereas they have not disclosed that they also are availing credit on common input services availed in the Corporate Office and have not reversed the proportionate amount of credit attributed to the exempted projects - penalty set aside. Appeal dismissed - decided against appellant.

Summary

Issues:
- Whether the appellant is liable to pay an amount as 6% of the value of exempted services under Rule 6(3)(i) of CCR 2004.
- Whether penalties are imposable on the appellant.

Analysis:
1. The appellant was found to have taken CENVAT Credit on common input services used for both taxable and exempted services without maintaining separate accounts as required under Rule 6(2) of CCR 2004. The show cause notice demanded various amounts, including 6% of the value of exempted services, non-payment of service tax, irregular credit on input services, and interest and penalties.

2. The lower authority initially dropped all demands, but on appeal by the Revenue, the first appellate authority confirmed some demands, including the demand of 6% of the value of exempted services due to the appellant's failure to maintain separate records. The appellant appealed seeking to drop the demand and penalties, conceding the remaining amounts.

3. The appellant argued that they maintained separate records for each project, but the Revenue contended that the appellant availed CENVAT Credit on common input services used in the Corporate Office without reversing the proportionate credit for exempted projects, as required by Rule 6(3) of CCR 2004.

4. The appellant admitted to availing CENVAT Credit on input services in the Corporate Office without reversing the proportionate credit for exempted projects. The appellant maintained separate accounts for services used in projects but not for common input services in the Corporate Office.

5. The Tribunal upheld the demand of 6% of the value of exempted services as the appellant failed to reverse the proportionate credit or pay the required amount under Rule 6(3) of CCR 2004. The Tribunal also found no infirmity in imposing penalties as the appellant did not disclose availing credit on common input services in the Corporate Office.

6. The appeal was rejected, upholding the impugned order confirming the demand of 6% of the value of exempted services and penalties. The Tribunal found the appellant's argument of maintaining separate records for each project insufficient regarding common input services in the Corporate Office.