2019 (4) TMI 132 - AT - Service Tax

CENVAT Credit - Provider of CHA services - input services - rental charges of godowns - stevedoring charges - reimbursable expenses - extended period of limitation - Held that - The stevedoring and godown rent are reimbursable expenses as they do not directly pertain to the Custom House Agent services rendered by them although they provide/facilitate these services also to their clients. In the instant case, the taxable service rendered by the appellant is Custom House Agent service and renting of godowns and stevedoring are separate services which are provided to their clients. The appellant themselves are treating these as reimbursable expenses incurred by them on behalf of their clients - such a service cannot become an input service for the Custom House Agent services provided by the appellant. The appellant had wrongly availed the CENVAT Credit on these two input services and the same needs to be recovered from them. Since the appellant has availed CENVAT credit on the services which, prima-facie, are not at all covered the definition of input services under CCR 2004 and they have not included the value of these services in their output services, the appellant has taken a credit in violation of the Rules with the intent to evade payment of service tax. Therefore, the extended period of limitation was correctly invoked. The demand is sustainable along with interest - there is no reason to interfere with the imposition of penalty under Rule 15(3) of CCR 2004, read with Section 78 - appeal allowed in part.

Summary

Issues:
Interpretation of input services for Custom House Agent and Steamer Agent services; Disallowance of CENVAT credit on rental charges of godown and stevedoring charges; Recovery under Rule 14 of CCR 2004; Imposition of interest and penalty.

Analysis:
The case involved the appellant providing Custom House Agent and Steamer Agent services along with related services like godown facilities. The dispute arose when the department sought to disallow CENVAT credit on rental charges of godown and stevedoring charges, claiming they were not included in taxable services. The appellant argued that these charges were reimbursable expenses collected from customers and not part of their taxable services. The department contended that if not part of taxable services, these charges could not be considered as input services for CENVAT credit.

The Tribunal analyzed the definition of input services under Rule 2(l) of CCR 2004, which includes services used by a provider of taxable service for providing output service. It was observed that the rental charges of godowns and stevedoring services, although provided by the appellant, were treated as reimbursable expenses and not directly related to the Custom House Agent services. Therefore, the Tribunal concluded that these expenses could not be considered as input services for the output services provided by the appellant.

Consequently, the Tribunal upheld the department's decision to disallow CENVAT credit on these services, citing that the appellant wrongly availed the credit in violation of the rules with the intent to evade service tax payment. The Tribunal also supported the imposition of interest and penalty under Rule 15(3) of CCR 2004, read with Section 78, due to the appellant's non-compliance.

In conclusion, the Tribunal rejected the appellant's appeal, upheld the lower authorities' decision to disallow CENVAT credit on rental charges of godown and stevedoring charges, and affirmed the imposition of interest and penalty. The judgment was pronounced on 25.03.2019.