2024 (6) TMI 1327 - AT - Service Tax

Eligibility to avail the CENVAT Credit on various input services for providing output services - Short term accommodation in Hotel services - Air-conditioned Restaurant Services - Rent-a-Cab services - Management Consultancy Services - extended period of limitation - penalty - HELD THAT - It is an undisputed fact of the case that applicable service tax has been paid on the input services. There is also no dispute that the appellants are eligible to avail CENVAT Credit. The dispute is relating to whether certain disputed services are used in or in relation to the provision of output service. The services which are in dispute are security service, professional service in assisting the business. It can be seen from the factual matrix of the case that both the security service and professional service were utilized by the appellants during the course of conducting certain activities which forms a part of providing output service - prima facie, when the service tax has been duly paid on the input services and the when such services were utilised in provision of output service, then taking of CENVAT Credit cannot be objected to inasmuch as Rule 3 of CENVAT Credit Rules, 2004 specifically state that a provider of output service to avail such credit of tax paid on input service. The grounds for rejection of CENVAT Credit on input services in the order of the adjudicating authority which was upheld by the learned Commissioner (Appeals) is that the input services have not been specifically used in the premises which have not been registered with local authorities. From the facts of the present case, it clearly transpires that all output services have been provided by the appellant by duly discharging the service tax applicable thereon. Wherever separate service tax registration having been for provision of service from a particular facility or premises, the output service tax in respect of such facility or premises is duly discharged, and the input services with specific reference to such facility have been availed by the appellants. However, where there is no such separate facility or premises for which separate registration has been taken, the central registered office providing output service was discharging the service tax liability as well as taking the CENVAT Credit on eligible input services. Since, there is no legal requirement or any embargo in Rule 3 of CCR on availing inputs service only in respect of particular place or premises of an output service provider, there is no ground for restricting or denying an output service provider in taking credit of eligible input CENVAT Credit. In view of the above, the grounds on which the inputs service credit was disallowed in the original order, which was upheld by the impugned order, have no legal basis and accordingly is liable to be dismissed as being not legally sustainable. Vehicle hire charges - vehicle expenses - club membership charges - HELD THAT - The definition of capital goods provided for motor vehicles, under clause (A) excludes motor vehicles falling under tariff headings 8702, 8703 which covers under its scope(i) motor vehicles for the transport of 10 or more persons, including the driver (ii) motor cars and other vehicles principally designed for the transport of persons, including station wagons and racing cars. In the present case, from the argument advanced by the consultant for the appellants, that whenever the vehicles owned by the appellants is in full use, the customers/clients using the hotel accommodation had to be provided with alternative vehicle/transport facility and thus the input services availed on Rent-a-Cab operator vehicle service is used in providing output service - the second limb of this requirement that the motor vehicle should be a capital goods is unable to be fulfilled, and thus under clause (B) of Rule 2(l) ibid, the input services availed in respect of such Rent-a-Cab operator vehicle service or such other motor vehicles is excluded from the scope of definition of input services in the present case - Similarly, the club membership services when used primarily for personal use has been excluded from the scope of input service by clause (C) of Rule 2(l) ibid in specific terms. In view of the above, the appellants are not eligible to avail CENVAT Credit for an amount of Rs. 14,231/- in respect of the above services as an input service. Determination of excess availment is with respect to ST-3 returns - HELD THAT - Once, the credit has been allowed to the appellants without raising any objection, then excess CENVAT Credit cannot be calculated on account of periodical ST-3 returns, as these are only declarations in the prescribed format filed by the appellants. The mistakes or errors, if any, in such incorrect declaration of ST-3 returns have to be identified and the excess credit taken, arising on account of ineligible or incorrect credit amount having been taken has to be worked out. Obviously in the present case, neither there is any such explanation nor there is any discussion in the original order or impugned order, to justify the case of demand of excess availment of CENVAT Credit - In the absence of any specific grounds and the evidences leading to such CENVAT Credit being ineligible not produced in the adjudication stage, it is not feasible to fasten such liability on the appellants - there is no justification for demand of excess CENVAT Credit taken by the appellants for Rs.26,449/-, and the same is liable to be dismissed as legally not sustainable. Extended period of limitation - penalty - HELD THAT - As rightly held in a number of decisions by the higher judicial forum, in respect of issues concerning interpretation of law, extended period of limitation cannot be invoked and penalty for evasion or for violation of law cannot be imposed. Therefore, in the present case, the adjudged demands having been held as not sustainable on merits, the imposition of penalty against the appellants by invoking extended period of demand is also not legally sustainable. The impugned order is liable to be set aside to the extent of denial of CENVAT Credit in respect of security services, Commission/service charges for a total amount of Rs.3,51,394/- and for denial of CENVAT Credit of Rs.26,449/- claiming as excess CENVAT Credit availed - In respect of CENVAT Credit of Rs.14,231/- being inadmissible CENVAT Credit on vehicle hire services, vehicle expenses, club membership charges which is held that being inadmissible in terms of Clause (B) and (C) of Rule 2(l) ibid, the impugned order upholding such confirmation in the original order is sustained. Appeal allowed in part.

Summary

Issues Involved:
1. Eligibility to avail CENVAT Credit on various input services.
2. Denial of CENVAT Credit on security services and professional services.
3. Denial of CENVAT Credit on vehicle hire charges, vehicle expenses, and club membership charges.
4. Alleged excess availment of CENVAT Credit.
5. Imposition of penalty and invocation of the extended period.

Issue-wise Detailed Analysis:

1. Eligibility to avail CENVAT Credit on various input services:
The appellants, engaged in providing output services in the hospitality sector, availed CENVAT Credit on input services such as security services and commission/service charges. The dispute pertains to whether these services qualify as input services under Rule 2(l) of the CENVAT Credit Rules, 2004. The Tribunal noted that the appellants had paid applicable service tax on these services and were eligible to avail CENVAT Credit. The primary contention was whether the services were used in or in relation to the provision of output services.

2. Denial of CENVAT Credit on security services and professional services:
The Tribunal examined the definition of "input service" under Rule 2(l) of CCR, 2004, which includes services used by a provider of output service for providing an output service. Security services and professional services, such as those used for safeguarding land parcels and brokerage for land transactions, were deemed essential for providing output services. The Tribunal concluded that these services fall within the "means" and "inclusion" parts of the definition of "input service" and are not covered by the "exclusion" part. Therefore, the denial of CENVAT Credit on these services was found to have no legal basis.

3. Denial of CENVAT Credit on vehicle hire charges, vehicle expenses, and club membership charges:
The Tribunal upheld the denial of CENVAT Credit on vehicle hire charges, vehicle expenses, and club membership charges amounting to Rs.14,231/-. These services fall under the exclusion clauses (B) and (C) of Rule 2(l) of CCR, 2004. Vehicle hire services and expenses relate to motor vehicles, which are not considered capital goods under the definition, and club membership services are primarily for personal use, making them ineligible for CENVAT Credit.

4. Alleged excess availment of CENVAT Credit:
The Tribunal found no justification for the demand of excess CENVAT Credit of Rs.26,449/-. The alleged excess availment was based on discrepancies in ST-3 returns, but there was no evidence of ineligible CENVAT Credit taken by the appellants. The Tribunal held that excess credit cannot be calculated based on incorrect declarations in ST-3 returns without identifying specific grounds and evidence.

5. Imposition of penalty and invocation of the extended period:
The Tribunal did not record any findings on the invocation of the extended period and imposition of penalty, as the appeal was disposed of on merits. However, it noted that in cases involving interpretation of law, the extended period of limitation cannot be invoked, and penalties cannot be imposed for evasion or violation of law. Consequently, the penalty imposed on the appellants was set aside.

Conclusion:
The Tribunal set aside the impugned order to the extent of denial of CENVAT Credit on security services and commission/service charges amounting to Rs.3,51,394/- and the alleged excess CENVAT Credit of Rs.26,449/-. The denial of CENVAT Credit on vehicle hire charges, vehicle expenses, and club membership charges amounting to Rs.14,231/- was upheld. The penalty imposed on the appellants was also set aside. The Tribunal allowed the appeal in favor of the appellants, granting CENVAT Credit amounting to Rs.3,77,843/-.