2022 (12) TMI 130 - AT - Central Excise

Wrongful availment and utilization of cenvat credit - input services or not - Air Travel Agency Service - Works Contract Service - Construction Service - manufacture of soft ferrite parts/components falling under Tariff Heading No.85051110 of the First Schedule to the Central Excise Tariff Act, 1985. Air Travel Agent/Rail Travel Agent Services - HELD THAT - If the Travels were for personal purpose or consumption of an employee, it would not be provided by the Appellant Company and will not be debited to their Books of Accounts. Unless and until, the Travel is for business exigencies, the Company would not include the expenditure and debit the same in the Books of Accounts. The entire order of the Adjudicating Authority is very cryptic and there is no discussion to justify the conclusion drawn in the adjudication order. He has simply proceeded to confirm the demand as proposed in the show-cause notice. Works Contract Service - HELD THAT - This Notification is applicable to individual/partnership firm and Hindu Undivided Family (HUF). It is not applicable to corporate assessee. The Appellant herein is a Private Limited Company and the services are supplied by Private Limited Company. Accordingly, this Notification is not applicable to the present case. Further, the Ld.Commissioner (Appeals) has also referred to Notification No.26/2012-ST dated 01.07.2012 for valuation of service and abatement. This Notification is also not applicable to the facts of the present case. Therefore, the credit disallowed under the Works Contract Service cannot be sustained and the same is set aside. Commercial and construction service - HELD THAT - Ld.Commissioner (Appeals) has observed that the service recipient is required to make payment of the service value on service along with the service tax within three months from the date of issuance of invoice - It is the submission of the Ld.Advocate for the Appellant that this aspect was never raised either in the show-cause notice or in the Order-in-Original and the ld.Commissioner (Appeals) has travelled beyond the scope of the Show-cause notice and this issue has been raised for the first time - the disallowance on this count is set aside. Air Travel Service - HELD THAT - The said services were used only for the Company s Executives to travel to achieve the business objective and has not been used for employees personal necessity, the credit of service tax paid on such services, cannot be denied in view of the decisions in the cases of Arkema Paroxides India Pvt. Ltd. Vs. CCEx., Pondicherry 2016 (9) TMI 435 - CESTAT CHENNAI , Goodluck Steel Tubes Ltd. Vs. Commissioner of Central Excise, Noida 2014 (1) TMI 37 - CESTAT NEW DELHI and Innovasynth Techologies (I) Ltd. Vs. CCE, Raigad 2015 (3) TMI 127 - CESTAT MUMBAI . The impugned order cannot be sustained and accordingly, the same is set aside - appeal allowed.

Summary

Issues:
1. Alleged wrong availment and utilization of cenvat credit on various services.
2. Disallowance of cenvat credit on Air Travel Agency Service.
3. Disallowance of cenvat credit on Works Contract Service.
4. Disallowance of cenvat credit on Construction Service.
5. Applicability of reverse charge mechanism for Works Contract Service.
6. Applicability of Notifications related to Works Contract Service.
7. Requirement of timely payment for commercial and construction services.
8. Dispute over the utilization of Air Travel Service for business purposes.

Analysis:

1. The Appellant, engaged in the manufacture of soft ferrite parts, faced a show-cause notice for alleged wrongful cenvat credit utilization on services like Air Travel Agency, Works Contract, and Construction Service. The Adjudicating Authority confirmed the demand, leading to an appeal before the Tribunal after rejection by the Commissioner (Appeals).

2. The Tribunal noted that the Commissioner (Appeals) lacked evidence to support the disallowance of cenvat credit on Air Travel Agency Service. It emphasized that unless travels were for business exigencies, they wouldn't be debited in the company's books. The Tribunal criticized the Adjudicating Authority's lack of justification and confirmed the demand without proper discussion.

3. Concerning Works Contract Service, the Tribunal clarified that the reverse charge mechanism introduced from 01.07.2012 did not apply to corporate entities like the Appellant, a Private Limited Company. Additionally, the Tribunal found that the relevant Notification for valuation and abatement wasn't applicable, leading to the setting aside of the disallowed credit.

4. Regarding commercial and construction services, the Tribunal disagreed with the Commissioner (Appeals) on the requirement of payment within three months, as it was not raised earlier and was beyond the show-cause notice's scope. The Tribunal ruled in favor of the Appellant, stating that timely payments justified the cenvat credit availed.

5. The Tribunal upheld the utilization of Air Travel Service for business purposes, citing precedents to support the Appellant's position. The judgments referenced emphasized that service tax credit cannot be denied when services are used to achieve business objectives.

6. Ultimately, the Tribunal set aside the impugned order, allowing the Appellant's appeal with any consequential relief as per the law, highlighting the flaws in the previous decisions and the Appellant's justifications for cenvat credit utilization.

End of Analysis