2019 (1) TMI 250 - AT - Service Tax

CENVAT Credit - credit on purchase of MS bars/saria on the strength of invoices issued by the manufacturers and admittedly used in the discharge of service rendered under the classification of Commercial and Industrial Construction Service or Commissioning and Installation service - validity of SCN - Held that - The SCN is wholly misconceived, being on the basis of alleged violation of Rule 8 of Cenvat Credit Rules, 2004. It is held that the provisions of Rule 8 of CCR are not applicable in case of an output service provider. It is an admitted fact that the appellant have received the inputs and have used them in rendering the output service, as is evident from the copy of the invoices produced before this Tribunal with reference to rendering of output service. The appellants have paid service tax without availing any abatement - the SCN are misconceived and not maintainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant, a contractor engaged in erection/commissioning of telecom towers, rightly took cenvat credit on purchase of MS bars/saria for services rendered.
2. Allegation of contravention of Rule 8 of CCR 2004 regarding credit taken on MS bars/saria.
3. Applicability of Rule 8 of CCR 2004 to a service provider.
4. Maintainability of show cause notice for invoking extended period of limitation.
5. Interpretation of rules regarding reversal of cenvat credit for removed inputs and capital goods.
6. Admissibility of show cause notice based on alleged Rule 8 violation applicable only to manufacturers.

Analysis:
The appeal revolved around the issue of whether the appellant, a contractor involved in erecting/commissioning telecom towers, rightfully claimed cenvat credit for MS bars/saria used in rendering services. The show cause notice alleged that the appellant availed credit without proper documentation and contravened Rule 8 of CCR 2004. The notice invoked an extended period of limitation to demand payment, including interest and penalties. The initial order confirmed the demand and penalties. The appellant contended that Rule 8 of CCR 2004, regarding storage of inputs, does not apply to service providers. The appellant argued that the notice was not maintainable as it was based on an alleged Rule 8 violation, which is relevant only to manufacturers.

The Commissioner (Appeals) upheld the disallowance of cenvat credit, citing the appellant's failure to provide evidence of receipt of goods and non-compliance with stock register entries. The Commissioner emphasized the importance of proper documentation for availing cenvat credit. However, the Tribunal found the show cause notice misconceived, as Rule 8 of CCR 2004 does not apply to service providers. The Tribunal noted that the appellant had received and utilized the inputs for services, supported by invoices. The Tribunal also highlighted the appellant's compliance with service tax payments without abatement. Consequently, the show cause notices were deemed not maintainable, and the appeal was allowed, setting aside the impugned order and entitling the appellant to consequential benefits.

In conclusion, the Tribunal's judgment clarified the applicability of rules regarding cenvat credit for service providers, emphasizing proper documentation and compliance. The decision highlighted the importance of interpreting rules correctly and ensuring show cause notices are based on relevant provisions applicable to the specific case. The appellant's entitlement to cenvat credit and consequential benefits was upheld based on the evidence presented and the legal interpretation of the rules.