2022 (8) TMI 501 - AT - Service Tax

Time Limitation - CENVAT Credit of Service Tax paid - telephone services - security service - advertisement service - man power supply service - maintenance and repair services - common input services utilised for both taxable services as well as trading of goods - non-maintenance of separate records - applicability of Rule 6 (3) of CCR 2004 - penalty - HELD THAT - On perusal of records, there is no positive evidence adduced by the department to establish that there is fraud, collusion or suppression of facts on the part of the appellant. The issue as to whether trading is exempted service or not being interpretational in nature, the invocation of extended period cannot sustain - the show cause notice in regard to the demand of wrongly availed cenvat credit is time-barred and requires to be set aside. Penalty - HELD THAT - There is no evidence to show that there has been fraud, collusion or suppression of facts on the part of the appellant, the penalty imposed cannot sustain. Penalty imposed in this regard is set aside without disturbing the demand of service tax along with interest - the impugned order is modified to the extent of setting aside the demand alleging wrongly availed cenvat credit and also setting aside penalty in respect of the demand of service tax - appeal allowed in part.

Issues involved:
1. Availing cenvat credit on common input services for both taxable services and trading of goods.
2. Demand of cenvat credit wrongly taken and utilized.
3. Demand of service tax for a specific period.
4. Contesting the case based on the ground of limitation.
5. Whether trading can be considered as an exempted service.
6. Payment of service tax amount and waiver of penalty.
7. Supporting findings of the impugned order.
8. Setting aside the demand of wrongly availed cenvat credit and penalty for service tax demand.

Analysis of Judgment:

1. The appellants were engaged in providing services as an Authorized Service Station and trading spares of Maruti brand cars. They availed cenvat credit on various services used for both taxable services and trading of goods, which included common input services. However, trading of goods became an exempted service from 01.04.2011. The issue arose when the appellants did not reverse the credit or pay the required amount as per Rule 6(3) of Cenvat Credit Rules, 2004. A show cause notice was issued for demanding wrongly availed cenvat credit and short paid service tax for a specific period. The original authority confirmed the demand, leading to the appeal before the Commissioner (Appeals).

2. The appellant argued that trading was considered an exempted service even before the amendment of 01.04.2011, citing a decision by the Hon'ble High Court of Madras. The appellant contested the case on the ground of limitation, highlighting that the demand was raised after a year and that the issue of trading as an exempted service was under litigation with decisions favoring both sides. The appellant maintained a bona fide belief regarding the exemption status of trading activities.

3. The tribunal acknowledged the litigation regarding trading as an exempted service before the amendment date and the absence of concrete evidence of fraud, collusion, or suppression of facts by the appellant. Considering the interpretational nature of the issue and the decisions presented, the tribunal held that the invocation of the extended period for demand cannot be sustained. Consequently, the demand for wrongly availed cenvat credit was deemed time-barred and set aside.

4. Regarding the demand for service tax, the appellant had already paid the amount along with interest, which was acknowledged in the adjudicating authority's order. The appellant requested a waiver of the imposed penalty, which was supported by the absence of evidence indicating fraudulent behavior. The tribunal agreed that the penalty imposed could not be sustained and set it aside while upholding the demand for service tax along with interest.

5. The impugned order was modified to set aside the demand for wrongly availed cenvat credit and the penalty related to the service tax demand. The appeal was partly allowed based on these terms, with any consequential relief to follow as per law.

This detailed analysis covers the issues raised in the judgment, the arguments presented by both parties, and the tribunal's decision based on legal principles and precedents cited during the proceedings.

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