2021 (8) TMI 232 - AT - Central Excise

CENVAT Credit - input services - Rent-a-Cab services - Insurance services - Membership Fees - Travel Expenses (Foreign) - period of dispute involved in this case is prior to April 2011 - levy of equal penalty - HELD THAT - The un-amended definition of input service among other taxable services, has included the phrase activities relating to business , for consideration as input service , for the purpose of availment of Cenvat benefit on the service tax component paid by the assessee. The said phrase finding place in the inclusive part of definition is very broad and takes within its ambit and purview the services used or utilised by the assessee for accomplishing its business purpose/activities - the disputed services in this case should merit consideration as input service for the purpose of entitling an assessee to avail the Cenvat benefit. The appellant did not submit the documentary evidences either before the original or first appellate authority to demonstrate that it is entitled to avail the Cenvat credit on some of the disputed services. In this context, the learned AR appearing for Revenue also stated that the appellant did not submit the invoices or other documents before the authorities below to show that the disputed services namely, Rent-a- Cab and Travel expenses (Foreign) were actually used for carrying out the business purpose - Since, the onus lies with the appellant for proper substantiation of the fact regarding availment of Cenvat credit on the disputed services viz., Rent-a-Cab and Travel expenses (Foreign) has not been fulfilled, the denial of Cenvat benefit on such services in the impugned order cannot be faulted. Levy of equal penalty - Section 11AC of the erstwhile Central Excise Act, 1944 read with the erstwhile Rule 15 of the Cenvat Credit Rules, 2004 - HELD THAT - In this case, it is an undisputed fact on record that the appellant had maintained the statutory records, reflecting therein the particulars of availment of Cenvat credit on the entire disputed services and that the above irregularities were observed by the audit wing of department during the course of scrutiny of the records. Under such circumstances, it cannot be said that there is element of suppression in defrauding the Government revenue by the appellant - invocation of the penal provisions for imposition of penalty on the appellant, without proper corroboration of facts, will not meet the ends of justice. Appeal allowed in part.

Summary

Issues:
Cenvat Credit on disputed services denied under Rule 2(l) of Cenvat Credit Rules, 2004 - Proper substantiation of Cenvat Credit entitlement - Imposition of penalty under Section 11AC of Central Excise Act, 1944.

Analysis:

1. Cenvat Credit Denial:
The case involved the denial of Cenvat Credit on certain services by the department, contending that they did not qualify as 'input services' as per Rule 2(l) of the Cenvat Credit Rules, 2004. The appellant argued that the disputed services were essential for their business activities and were treated as business expenditure in their accounts. The Tribunal agreed that the phrase "activities relating to business" in the definition of 'input service' was broad, covering services used for business purposes. However, the appellant failed to provide documentary evidence to substantiate their claim for Cenvat Credit on some services, leading to the denial of credit on those specific services.

2. Substantiation of Cenvat Credit Entitlement:
While the appellant contended that the disputed services were used for business purposes, they did not submit necessary documents to prove the same before the authorities. The lack of documentary evidence, especially for services like Rent-a-Cab and Travel expenses (Foreign), led to the Tribunal upholding the denial of Cenvat benefit on those services. The Tribunal emphasized that the onus was on the appellant to adequately demonstrate the eligibility for Cenvat Credit, which they failed to fulfill in this case.

3. Imposition of Penalty:
The original authority imposed a penalty on the appellant under Section 11AC of the Central Excise Act, 1944, along with the Cenvat demand. However, the Tribunal noted that there was no evidence of suppression or intention to defraud the government revenue by the appellant. Since the appellant maintained proper records of Cenvat credit availed, and the irregularities were discovered during an audit, the Tribunal deemed the penalty imposition unjustified. Consequently, the Tribunal set aside the penalty imposed on the appellant.

Conclusion:
The Tribunal partially allowed the appeal, setting aside the confirmation of demand and penalty on certain services while upholding it on others. The decision highlighted the importance of providing adequate documentary evidence to substantiate Cenvat Credit claims and emphasized that penalties should be imposed judiciously, considering the circumstances of each case.