2021 (11) TMI 280 - AT - Service Tax

Utilization of CENVAT Credit for payment of service tax - construction/works contract services - renting of immovable property services - period January, 2015 to September, 2015 - extended period of limitation - penalties - HELD THAT - The Department never issued any show cause notice for disallowance of cenvat credit taken, which has been disclosed in the Returns filed before the Department and further, proper records were maintained. Further, it is found that once the credit has been taken in terms of Rule 3 of Cenvat Credit Rules. The same has been objected to by the Department under Rule 14 of Cenvat Credit Rules only on the utilisation of such credit for payment of output service tax, in accordance with Rule 3(4) (e) of Cenvat Credit Rules. It is further noticed that Rule 14 has been invoked only on the event of utilisation of accumulated cenvat credit. Extended period of limitation - Penalties - HELD THAT - The appellant has rightly utilised this accumulated cenvat credit for payment of output service tax of ₹ 3,98,150/-, which has been objected to by the Revenue and further demand on this score is set aside - extended period of limitation is not attracted in the facts and circumstances as the issue being wholly of interpretation. Accordingly, penalties imposed under Rule 15 of CCR as well as under Section 78 of the Finance Act are set aside. Matter remanded to the adjudicating authority for verification and to allow, if found eligible - appeal allowed by way of remand.

Summary

Issues:
1. Utilization of cenvat credit for service tax payment
2. Admissibility of cenvat credit on input services for construction
3. Double demand of service tax

Analysis:

Issue 1: Utilization of cenvat credit for service tax payment
The main issue in this appeal was whether the appellant correctly utilized cenvat credit for the payment of service tax and if the same tax could be demanded again. The appellant availed cenvat credit for various services used in the construction of a mall and a building in Noida. The Revenue contended that the credit on services used for the mall was not admissible as the mall was not dutiable under the Central Excise Act or the Service Tax Act. The audit proposed to disallow the credit and demanded the amount utilized for service tax payment. The Additional Commissioner disallowed the credit, demanded service tax, imposed penalties, and interest. However, the Commissioner (Appeals) remanded the matter for re-examination regarding the credit availed for services other than the construction of the mall.

Issue 2: Admissibility of cenvat credit on input services for construction
The Commissioner (Appeals) held that the service portion of the work contract for construction work was excluded from input service, but there was no restriction on other input services for the construction of the mall. The appellant argued that the credit utilized for service tax payment was admissible under Rule 3(4)(e) of the Cenvat Credit Rules, and any doubt on eligibility could result in disallowance of a particular credit only. The Tribunal found that the appellant rightly utilized the cenvat credit for service tax payment, and the demand by the Revenue was set aside. Penalties were also revoked.

Issue 3: Double demand of service tax
Regarding the double demand of service tax, the Commissioner (Appeals) determined that the liability was due to the building, and the credit used for service tax payment was not admissible. The Tribunal upheld this decision, stating that there was no duplication of demand and the demand was rightly made. The appellant's appeal was allowed with consequential benefits, and the impugned order was modified accordingly.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the cenvat credit utilized for service tax payment was admissible, and the demand by the Revenue was set aside. The penalties imposed were also revoked, and the appeal was allowed with consequential benefits.