2019 (4) TMI 904 - AT - Service Tax

Demand of Service tax - Director s Remuneration - disallowance of cenvat credit - wrong charge of interest for the delayed payment of tax - Held that - All the mentioned services, have been received admittedly by the appellant and availed by them in rendering of the output services. Accordingly, I hold that all the services in question are eligible for cenvat credit under Rule 2 (l)of the Cenvat Credit Rules, 2004, which provides, any service received by the output service provider for rendering an output service are eligible for input service credit . Confirmation of interest under Section 75 of the Finance Act - Held that - Accordingly, for the period from December, 2013 to March, 2014, instead of interest calculated at ₹ 12,77,475/-, but the same should be ₹ 5,82,559/-. Penalty u/s 76 and 78 of FA - Held that - There is no case made out for willful contravention of or mis-conduct and fraud made out against the appellant. Thus, the penalty under Section 78 and 76 is set aside. There is cogent reasons given by the appellant for delayed payment of tax, which has been found justifiable. Further, there is nothing fraudulent or deliberate delay on the part of the appellant, in view of the debtors/outstanding for output services - penalty under Section 76 & 78 is set aside. The appeal is allowed - decided in favor of appellant.

Summary

Issues:
1. Director's remuneration - Service tax liability
2. Denial of cenvat credit on various services
3. Calculation error in interest under Section 75 of the Finance Act
4. Penalty under Sections 76 & 78 of the Act

Director's Remuneration - Service Tax Liability:
The appellant contested the service tax on the Director's Remuneration, claiming it falls under the negative list under Section 65B(44)(d) due to an employer-employee relationship. The appellant supported their claim with a salary certificate in Form-16. The Form-16 indicated a total remuneration of ?17,21,700, covering the disputed amount of ?11,13,900. The Tribunal held that the remuneration was exempt from service tax under Section 65B(44) of the Finance Act, 1994, as it was in the nature of an employer-employee relationship.

Denial of Cenvat Credit on Various Services:
The appellant, engaged in providing Consulting Engineering Services, was denied cenvat credit on services like vehicle hiring, AC supply, hotel services, meal coupons, pest control, and website services. The appellant argued that these services were essential for rendering output services and qualified as "input services." The Tribunal ruled in favor of the appellant, stating that all the mentioned services were received and utilized in providing output services, making them eligible for cenvat credit under Rule 2(l) of the Cenvat Credit Rules, 2004.

Calculation Error in Interest Under Section 75 of the Finance Act:
A calculation error in interest under Section 75 of the Finance Act was pointed out, leading to a significant discrepancy in the interest amount. The appellant submitted a revised calculation, demonstrating the error in the Department's calculation. The Tribunal accepted the revised calculation, setting aside the Revenue's calculation and remanding the matter for verification by the Adjudicating Authority.

Penalty Under Sections 76 & 78 of the Act:
The Tribunal found no willful contravention, misconduct, or fraud on the appellant's part regarding the delayed payment of tax for output services. The appellant provided justifiable reasons for the delay, citing financial difficulties due to outstanding debtors. The Tribunal acknowledged the appellant's regular tax payments and cleared dues with interest well before the show cause notice. Consequently, the penalties under Sections 76 & 78 were set aside, and the appeal was allowed, granting the appellant consequential benefits in accordance with the law.