2019 (3) TMI 1053 - AT - Service Tax

CENVAT Credit - common services used for taxable services as well as traded goods - reversal of proportionate credit - Rule 6(3A) of CENVAT Credit Rules - Held that - Admittedly the appellant has obtained centralized registration from 27.5.2010 and they have showroom and service station at 5 locations. Further, it is found from the showroom that the appellant is not only trading the goods and spare parts and accessories but also providing taxable output service i.e., Business Auxiliary Service, Insurance Service and received commission which is subjected to tax. During the pendency of these appeals, the appellants have reversed the proportionate CENVAT credit in both the appeals by paying through challans as per the requirement of Rule 6(3A) of CENVAT Credit Rules. These payments made by the appellant needs to be verified as per Rule 6(3A) and for this purpose, both the cases are remanded back to the original authority to find out whether the appellant has reversed the proportionate credit as per Rule 6(3A) or not. Penalty u/r 15(1) - Held that - The appellants are not liable to pay penalty under Rule 15(1) of the CENVAT Credit Rules because there is no proposal to impose penalty under Rule 15(1) and the proposal was only under Section 78 read with Rule 15(3) which the Commissioner (A) has held was not tenable in law. Appeal allowed by way of remand.

Issues:
- Appeal against common impugned order remanding the matter for re-verification.
- Availment of CENVAT credit on input services.
- Eligibility for credit on servicing charges by other authorized service stations.
- Entitlement for proportionate credit in stand-alone show-room.
- Disallowance and demand of CENVAT credit without justification.
- Reversal of CENVAT credit and compliance with Rule 6(3A).
- Imposition of penalty under Rule 15(1) of CENVAT Credit Rules.

Analysis:

1. Appeal against Common Impugned Order:
The appellants filed appeals against the common impugned order remanding the matter for re-verification by the Commissioner (A). Both appeals were disposed of by a common order due to the identical issue involved, except for different periods. The Tribunal considered the submissions of both parties and perused the records to reach a decision.

2. Availment of CENVAT Credit on Input Services:
The Departmental officers noted during the audit that the appellants had availed CENVAT credit on input services related to advertising for the sale of cars and rent paid towards showrooms. It was observed that the premises where these services were received were not registered under Service Tax. The original authority confirmed the demand after due process. The appellants contended that the impugned order was not sustainable as it did not consider the facts and binding judicial precedents. They argued that they were entitled to the credit based on previous decisions and provided detailed submissions regarding the tax payments and compliance with Rule 6(3A) for reversing the CENVAT credit.

3. Eligibility for Credit on Servicing Charges:
The issue of availing CENVAT credit on servicing charges by other authorized service stations was raised. The appellants argued that they were eligible for such credit as the servicing took place at those stations, even though not at their premises. They emphasized the proportionate credit reversal and compliance with Rule 6(3A) for both the periods in question.

4. Entitlement for Proportionate Credit in Stand-alone Show-room:
The appellants contended that even in the stand-alone show-room, they provided output services such as Business Auxiliary Services, Insurance Commission Service, and Membership service. They argued for proportionate credit entitlement based on the services rendered at the show-room. The Tribunal acknowledged the need for a holistic decision considering the centralized registration obtained by the appellants.

5. Disallowance and Demand of CENVAT Credit:
The Department disallowed and demanded the entire CENVAT credit related to service station credit without proper justification, according to the appellants. They highlighted the tax payments made and the reversal of CENVAT credit as per Rule 6(3A) for both periods, supported by certificates from their Chartered Accountant.

6. Reversal of CENVAT Credit and Compliance with Rule 6(3A):
The Tribunal noted that the appellants had reversed the proportionate CENVAT credit for both periods by paying through challans as required by Rule 6(3A) of the CENVAT Credit Rules. The Tribunal remanded the cases back to the original authority to verify the compliance with Rule 6(3A) regarding the reversal of proportionate credit.

7. Imposition of Penalty under Rule 15(1) of CENVAT Credit Rules:
The imposition of penalty under Rule 15(1) was considered by the Commissioner (A) but was deemed not tenable in law by the Tribunal. The Tribunal held that there was no proposal to impose penalty under Rule 15(1), and the proposal was only under Section 78 read with Rule 15(3), which was not considered valid. Therefore, the appellants were not liable to pay a penalty under Rule 15(1) of the CENVAT Credit Rules.

In conclusion, the Tribunal allowed both appeals by remanding the matter to the original authority for verifying the compliance of the appellants in reversing the proportionate CENVAT credit as per Rule 6(3A) requirements. The imposition of penalty under Rule 15(1) was deemed not applicable.

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