2020 (3) TMI 18 - AT - Service Tax

Non-payment of service tax - GTA service - repair and maintenance service - demand of service tax - recovery of inadmissible Cenvat Credit - demand of interest and penalty - HELD THAT - Appellant had substantially demonstrated before the adjudicating authority about the differential amount that found reflected in ST-3 Return and financial statement but in the OIO the said explanation was dishonoured primarily on two grounds. First, appellant has accepted the audit report and discharged service tax liability immediately thereafter. Second, notification no. 30/2012-ST clearly stipulated that the service recipient in respect of transportation of goods is liable to pay 100% service tax under the reverse charge mechanism. Both the grounds are unsustainable for the reason that acceptance of an assessee or offer by an assessee to pay tax will not make the taxation rule legally tenable since it has to pay tax supposed to be imposed in conformity to Article-265 of the Constitution of India. CENVAT credit - HELD THAT - As found from the OIO and OIA, admissibility of Cenvat Credit on other services like general insurance and maintenance, repair services were denied on the ground that Rule 2(l) clearly denies such availment but a bare reading of Rule 2(l) (BA) reveals that service of general insurance business, servicing, repair and maintenance, in so far as they relate to motor vehicle which is not used as capital goods are excluded from the definition of input service with certain exceptions. However, in the instance case, appellant had manifestly demonstrated that it had availed management, maintenance and repair services as defined in section 65(64) of the Finance Act, 1994 and not paid service tax towards maintenance and repair of vehicle, which was held to be inadmissible with the introduction of negative list. Demand of intererst and penalty - HELD THAT - In view of decision of this Tribunal given in the case of NAGPUR NAGRIK SAHAKARI BANK LTD. VERSUS CCE ST, NAGPUR 2018 (11) TMI 1524 - CESTAT MUMBAI , Cenvat Credit taken or utilised before amendment and utilised after amendment do not carry much difference to impose interest and penalty unless such utilisation is in respect of inadmissible credits. Therefore no penalty can be imposed on the appellant on all these three scores since the demands are unsustainable in law and facts. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of Service Tax demand on goods transport service, repair, and maintenance service.
2. Recovery of inadmissible Cenvat Credit along with interest and penalty.

Analysis:

Issue 1: Confirmation of Service Tax Demand
The appeal arose from an order by the Commissioner (Appeals) confirming Service Tax demand on various services, including goods transport agency services and repair and maintenance services. The Appellant, registered as an Input Service Distributor, was found to have failed to discharge service tax liability under reverse charge mechanism for goods transport services received. Additionally, the Appellant availed maintenance and repair services along with general insurance services, resulting in inadmissible Cenvat Credit due to changes in the negative list. The audit report led to a show cause notice for recovery of inadmissible credit and service tax amounts. The Commissioner (Appeals) upheld the duty demand, interest, and penalty imposed by the Addl. Commissioner, Service Tax, Mumbai.

Issue 2: Recovery of Inadmissible Cenvat Credit
Regarding the inadmissible Cenvat Credit, the Appellant challenged the denial of credit on general insurance services and repair and maintenance services. The Appellant contended that the services were for management purposes and not solely for repair and maintenance of vehicles. The Appellant argued that the orders were erroneous, emphasizing judicial decisions supporting their position. The Authorised Representative for the respondent department defended the Commissioner (Appeals)'s order, citing changes in the definition of input service under the Cenvat Credit Rule 2004. The Appellant's explanations regarding the differential amounts in financial statements and ST-3 Returns were dismissed primarily on the grounds that the Appellant accepted the audit report and the reverse charge mechanism applied to transportation services.

In the final judgment, the Tribunal found in favor of the Appellant, allowing the appeal with consequential relief. The Commissioner (Appeals)'s order was set aside, concluding that the demands were unsustainable in law and facts. The Tribunal highlighted discrepancies in the treatment of services by the lower authorities and emphasized that no penalty could be imposed on the Appellant due to the unsustainable demands.