2009 (7) TMI 259 - AT - Service Tax

Denial of CENVAT credit - mobile phones were procured by the company and supplied to some of their functionaries/employees and that mobile phone bills were paid by the company. In this circumstance, there is a presumption that the mobile phones were meant to be used in connection with the business of the company. This presumption, of course, is rebuttable. - As this presumption is in favour of the assessee, the rebuttal has to come from the Revenue. In this case, there is nothing in the impugned order to show that this presumption was successfully rebutted. Presumption is not available to other services and, therefore, the burden of proof is on the assessee. The appellant has not adduced evidence to establish that those services were, in fact, used in or in relation to the manufacture of the final products credit not admissible except on mobile phone service - in so far as telephone service is concerned, there is no dispute inasmuch as the telephone bills were not in the name of the assessee and the amount of CENVAT credit was undertaken to be paid - According to this sub-rule (2) of Rule 15, irregular availment of CENVAT credit by way of fraud, collusion, suppression/mis-statement of facts or contravention of rules with intention to evade payment of duty would attract a penalty. - None of these ingredients was alleged in any of the show-cause notices and none was found by any of the lower authorities. Therefore, the penalty imposed on the assessee cannot be sustained

Summary

The Appellate Tribunal CESTAT, Mumbai, presided over by Shri P.G. Chacko, Member (J), heard an appeal against the denial of CENVAT credit amounting to Rs. 40,592 on certain taxable services for the period 2004-2005 to 2006-2007. The appellant also contested an equal penalty imposed under Rule 15 of the CENVAT Credit Rules, 2004, in conjunction with Section 11AC of the Central Excise Act. The denial of credit under two separate show-cause notices was based on various grounds, including limitation, ineligibility of certain services, and failure to prove usage in relation to final product manufacturing. The original authority allowed credit for some services but not others, leading to a partially unfavorable outcome for the appellant. The Commissioner (Appeals) upheld the decision, emphasizing the appellant's failure to demonstrate the services' relevance to final product manufacturing. Specifically, CENVAT credit for mobile phone services was denied due to lack of evidence, with reference to relevant case law. The Appellate Tribunal, after considering arguments from both sides, concluded that the presumption of mobile phone service usage for business purposes was not successfully rebutted, making CENVAT credit admissible. However, the burden of proof for other services rested with the appellant, who failed to establish their direct or indirect connection to final product manufacturing. The penalty imposed was deemed unjustified, as no evidence of fraud, collusion, or contravention of rules was presented. The appeal was partly allowed, with the penalty set aside.