2020 (7) TMI 264 - AT - Service Tax

CENVAT Credit - common input services used for taxable as well as exempt goods - It appeared to Revenue that while calculating the percentage of ineligible credit under Rule 6(3A) appellants have not included the amount of cenvat credit availed on Information Technology and Software Services contending that such ITSS is also a taxable output service which contention appears to be incorrect - Rule 6(3A) of Cenvat Credit Rules - HELD THAT - The allegations in the present case for the period 2008-09 are similar to the allegations for the earlier period 2015-16 and further taking notice that now Revenue taking notice of the substitution of Rule 6 vide Notification No. 13/2016 which is by way of clarification and ease of doing business hence the issue is held in favour of the appellant. The appellant shall be entitled to consequential benefits including disposal of the rebate claim in accordance with law if the same is still pending - Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:

1. Eligibility of Cenvat credit on input services.
2. Calculation of ineligible Cenvat credit under Rule 6(3A) of Cenvat Credit Rules.
3. Proportionate credit of common input services under Rule 6(5) of Cenvat Credit Rules.
4. Validity of invoices for availing Cenvat credit.
5. Penalties imposed for irregular service tax credits.

Detailed Analysis:

1. Eligibility of Cenvat Credit on Input Services:

The appellant availed service tax credit on several input services during 2008-09 and filed a rebate claim for export of taxable services under Business Auxiliary Service (BAS). The Revenue contended that the appellant incorrectly included the credit availed on Information Technology Software Services (ITSS) as taxable output service. The appellant argued that ITSS credit was wholly towards the provision of taxable services and maintained proper records. The Tribunal found that the appellant’s claim was consistent with the rules and the credit availed for ITSS was valid.

2. Calculation of Ineligible Cenvat Credit under Rule 6(3A) of Cenvat Credit Rules:

The Revenue observed that the appellant did not include the amount of Cenvat credit availed on ITSS while calculating the percentage of ineligible credit under Rule 6(3A). The appellant argued that ITSS is a taxable output service and should not be included in the calculation of ineligible credit. The Tribunal, referencing the IBM India Pvt. Ltd. case, held that services used exclusively for taxable services should not be included in the calculation for ineligible credit. Thus, the appellant’s method was correct.

3. Proportionate Credit of Common Input Services under Rule 6(5) of Cenvat Credit Rules:

The Revenue argued that the appellant availed 100% credit on services not covered under Rule 6(5), which should be restricted to 5%. The appellant contended that the services specified in Rule 6(5) are eligible for full credit unless used exclusively for exempted services. The Tribunal, citing the Superpacks case, held that the appellant was entitled to full credit for services specified under Rule 6(5).

4. Validity of Invoices for Availing Cenvat Credit:

The Revenue claimed that the appellant availed credit on invoices that were either not valid or lacked proper details. The appellant argued that they had been audited by the Department and no discrepancies were found. They also reversed credit with interest for any discrepancies found. The Tribunal noted that the show-cause notice did not specify the defective invoices and found the Revenue’s allegations vague. The appellant’s process for availing credit was deemed proper.

5. Penalties Imposed for Irregular Service Tax Credits:

The Revenue imposed penalties under Rule 15(4) of the Cenvat Credit Rules read with Section 78 of the Finance Act, 1994, for irregular service tax credits. The appellant argued that there was no deliberate default and penalties should be set aside. The Tribunal, considering the facts and previous rulings, set aside the penalties, finding no deliberate default by the appellant.

Conclusion:

The Tribunal allowed the appeal, set aside the impugned order, and held that the appellant is entitled to consequential benefits including the disposal of the rebate claim in accordance with the law. The Tribunal found that the appellant had followed the provisions of the Service Tax Law and Rules correctly and that the issues raised by the Revenue were already settled by previous rulings.