2019 (12) TMI 555 - AT - Service Tax

CENVAT Credit - Capital goods - motor vehicles - appellant had rendered only service of clearing and forwarding agent - bundled services - recovery u/r 14 of CENVAT Credit Rules 2004 read with proviso to Section 73(1) of Finance Act 1994 - HELD THAT - Clearing and forwarding agency service was clearly not covered under Rule 2(a)(B). Rule 2(a)(B) of CENVAT Credit Rules 2004 did not permit CENVAT credit used for cargo handling, transportation etc. but specifically for rendering some services classifiable under some sub-clauses of Section 65(105). The services which are rendered often involve more than one type of activities. In such cases, the service should be classified as that service which gives its essential character. There is no provision in this Section or under any other provision to classify the same service under more than one head for different purposes such as one head for paying service tax and another to claim CENVAT credit. Undisputedly the appellant has only rendered clearing and forwarding services which does not entitle them to CENVAT credit on the motor vehicles in view of the specific exclusion in CENVAT Credit Rules 2004 - thus, the appellant has wrongly availed CENVAT Credit. Extended period of limitation - penalty - HELD THAT - There are no reason for the appellant to have availed CENVAT credit when they were not rendering services which would entitle them to such credit. This is a clear violation of the provisions of the rules with an intent to evade irregularly availed CENVAT credit and to that extent evade payment of service tax - the invocation of extended period of limitation as well as imposition of penalty justified. Appeal dismissed - decided against appellant.

Summary

Issues:
- Availment of CENVAT Credit on motor vehicles as capital goods by the appellant.

Analysis:
1. The appellant, a service provider registered for providing clearing and forwarding agent services, availed CENVAT credit under CENVAT Credit Rules 2004. The dispute arose regarding the availment of CENVAT Credit on motor vehicles as capital goods by the appellant.

2. The CENVAT Credit Rules 2004 exclude motor vehicles from being considered as capital goods unless used for specific services such as courier agencies, tour operators, rent-a-cab services, etc. The appellant had not rendered any of these services but only provided clearing and forwarding services.

3. A show-cause notice was issued seeking to deny the CENVAT Credit availed by the appellant on motor vehicles and recover the same under the rules. The adjudicating authority confirmed the demand, imposed penalties, and interest. The appellant's appeal was rejected by the first appellate authority, leading to the current appeal.

4. The appellant argued that their clearing and forwarding activities involved cargo handling, making them eligible for CENVAT Credit under the rules. However, the Revenue contended that since the appellant did not provide the specified services, they were not entitled to the credit.

5. The Tribunal analyzed the provisions of CENVAT Credit Rules 2004 and Section 66F of the Finance Act 1994. It concluded that the appellant wrongly availed the CENVAT Credit as their services did not fall under the categories specified for claiming such credit. The Tribunal upheld the impugned order, finding the invocation of extended limitation period and imposition of penalties justified.

This detailed analysis highlights the key arguments, legal provisions, and the Tribunal's reasoning leading to the decision to reject the appeal and uphold the order.