2021 (12) TMI 1051 - AT - Service Tax

Reversal of CENVAT Credit - capital goods or not - lease rentals - set top boxes and other CPE s supplied to the consumers on the rental basis - HELD THAT - The issue in respect of the CPE, provided by the appellant on rental basis, which upon deactivation of service have not been returned back by the customer, to the appellants have been dealt by the tribunal in various cases - reliance can be placed in the case of VIDEOCON D2H LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX 2020 (2) TMI 1254 - CESTAT MUMBAI where it was held that In the absence of any specific statutory provision requiring such reversal along with absence of further availment of credit by any other assessee, it is held that the impugned order is erroneous in its presumption and in application of law. Reversal not required - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Disallowance and recovery of CENVAT Credit.
2. Recovery of interest on disallowed CENVAT Credit.
3. Imposition of penalty under Rule 15(1) of CENVAT Credit Rules, 2004.
4. Imposition of penalty for failing to maintain proper accounts under Section 77 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Disallowance and Recovery of CENVAT Credit:
The Commissioner disallowed CENVAT Credit amounting to ?9,55,98,556/- and ordered its recovery under Rule 14 of CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994. The appellant, a provider of broadcasting services, had taken CENVAT Credit on "consumer premise equipment" (CPE) provided to customers on a rental basis. When customers disconnected the service, the equipment remained at their premises and was eventually written off in the appellant's books. The revenue argued that the appellant should reverse the CENVAT Credit for these written-off equipment. The Tribunal noted that the appellant had reversed the credit for CPE sold to customers, which was not disputed by the revenue. The Tribunal referred to previous decisions, including Videocon D2H Ltd and Dish TV India Ltd, where it was held that CENVAT Credit need not be reversed for capital goods used to provide output services even if the service was deactivated. The Tribunal concluded that the disallowance of CENVAT Credit was not justified and set aside the impugned order.

2. Recovery of Interest on Disallowed CENVAT Credit:
The Commissioner ordered the recovery of interest on the disallowed CENVAT Credit under Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of the Finance Act, 1994. As the Tribunal found no merit in the disallowance of CENVAT Credit, the order for recovery of interest was also set aside.

3. Imposition of Penalty under Rule 15(1) of CENVAT Credit Rules, 2004:
A penalty of ?95,00,000/- was imposed under Rule 15(1) of CENVAT Credit Rules, 2004 read with Section 76 of the Finance Act, 1994. The Tribunal, following its decision to set aside the disallowance of CENVAT Credit, also set aside the penalty imposed.

4. Imposition of Penalty for Failing to Maintain Proper Accounts under Section 77 of the Finance Act, 1994:
A penalty of ?10,000/- was imposed under Section 77 of the Finance Act, 1994 for failing to maintain proper accounts and records regarding CENVAT Credit on capital goods not used in output services. The Tribunal, having set aside the primary disallowance and penalties, also set aside this penalty.

Conclusion:
The Tribunal set aside the impugned order in its entirety, including the disallowance and recovery of CENVAT Credit, the recovery of interest, and the imposition of penalties. The appeal was allowed, and the order was pronounced in the open court on 23.12.2021.

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