2019 (4) TMI 905 - AT - Service Tax

CENVAT Credit - wiring/ installation of fans - disallowed for civil work activity - Held that - The cenvat credit availed on input service for electrical installation in building, admittedly they have been used inside the factory, hence allowable under Rule 2(k) of the Cenvat Credit Rules, 2004 - Credit allowed. Non-payment of service tax - vitrified tiles used for flooring of the factory - Rent-a-Cab scheme Service - reverse charge mechanism - Held that - The said amount has already been deposited/ reversed alongwith interest - Under Section 73(3) of the Finance Act, the show cause notice relating to these amounts is bad. Penalty u/s 78 of FA - Held that - The penalty under Section 78 is dropped as the issue relates to interpretation and no case of deliberate defiance is made out. Appeal allowed in part.

Issues:
1. Disallowance of cenvat credit for certain amounts.
2. Reduction of penalty imposed under Cenvat Credit Rules, 2004.
3. Disallowance of cenvat credit for electrical installation in building.
4. Disallowance of cenvat credit for wiring/installation of fans.
5. Disallowance of cenvat credit on vitrified tiles used for flooring.
6. Failure to pay service tax under reverse charge mechanism for rent-a-cab service.
7. Validity of the show cause notice.

1. Disallowance of Cenvat Credit for Certain Amounts:
The appellant, engaged in auto parts manufacturing, was issued a show cause notice for taking ineligible cenvat credit. The notice alleged various discrepancies, including disallowing cenvat credit amounting to ?18,33,254/- and proposing penalties. The appellant contested the notice, leading to confirmation of demands and penalties. The Commissioner (Appeals) partially allowed the appeal, reducing penalties and allowing cenvat credit of ?15,83,542/-. The appellant appealed to the Tribunal.

2. Reduction of Penalty Imposed Under Cenvat Credit Rules, 2004:
Regarding the disallowed cenvat credit of ?2,11,027/- for lack of invoice from a construction service provider, the appellant presented evidence of transactions with the service provider but misplaced invoices. The Tribunal allowed this ground for remand to produce sufficient evidence. The Tribunal also addressed other disallowed amounts due to calculation errors and inadmissible service portions, providing specific details for each.

3. Disallowance of Cenvat Credit for Electrical Installation in Building:
The disallowance of cenvat credit amounting to ?7,110/- for electrical installation in the building was not contested by the appellant. This issue was deemed inadmissible, and the Tribunal upheld the decision.

4. Disallowance of Cenvat Credit for Wiring/Installation of Fans:
Concerning the disallowed cenvat credit of ?25,932/- for wiring/installation of fans, the appellant argued that the credit was for electrical fixtures in their administrative office within the factory. The Tribunal allowed this credit, stating that electrical installations used inside the factory are allowable under the Cenvat Credit Rules, 2004.

5. Disallowance of Cenvat Credit on Vitrified Tiles Used for Flooring:
The appellant deposited an amount on capital goods, vitrified tiles used for flooring, and on rent-a-cab services for which service tax was not paid under reverse charge mechanism. The Tribunal found that these amounts were deposited before the show cause notice was issued, rendering the notice invalid under Section 73(3) of the Finance Act.

6. Validity of the Show Cause Notice:
Based on the finding that the amounts in question were already deposited before the notice, the Tribunal dropped the penalty under Section 78 of the Finance Act. The appellant was directed to appear before the adjudicating authority with explanations and evidence within sixty days. The appeal was allowed in part, considering the interpretation of the issues involved.

This detailed analysis covers the various issues addressed in the judgment, highlighting the Tribunal's findings and decisions on each matter.

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