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2024 (7) TMI 9 - AT - Service TaxErroneous availment of CENVAT credit of the input services used for providing taxable service - composite contracts - Erection Commissioning or Installation services or not - service provided to American Power Corporation of India Ltd (APC). Demand of duty prior to March 2007 during the first period of dispute viz. October 2005 to March 2007 - HELD THAT - This activity was composite involving both supply of goods and materials and erection commissioning and installation of the same. Since the activity involved is execution of works contract (being composite) the Appellant paid service tax only on the service tax element computed as 33% of the total invoice value/contract value since 67% of the value was subject to payment of VAT and the appellant had paid VAT on the said 67% value - Honourable Supreme Court in COMMISSIONER CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT held that service category of Erection Commissioning or Installation as defined in section 65(105) (zzd) did not apply to composite contracts/works prior to 01.06.2007 - demand for the said period is unsustainable. Demand for the period 2007-2008 and 2008-2009 - HELD THAT - Appellant has only provided labour/service of erection and commission to APC and from 2009 they have discontinued the activity. Appellant paid service tax on full value of the invoice raised for labour service charge and as per the letter dated 11.02.2011 and 19.12.2011 these facts were brought to the notice of concerned authorities. In the absence of any contrary finding in this regard the demand is unsustainable. Demand against Cenvat credit for the period viz. 2006 to 2008 - HELD THAT - After collecting service tax paid by APC which was charged in the invoices raised on the Appellant the Respondent could not have turned around to hold that the Appellant is not entitled for credit since no service was received. Moreover when the service provider was not before the Tribunal Tribunal cannot go into the question as to whether the said service provider had provided service to appellant or not when that is the admitted position then denial of the benefit of such tax amount as Cenvat credit to the appellants as the recipient of such service cannot be questioned by the jurisdictional service tax authorities. Further since the demand under proviso to Section 73(1) of the Finance Act is not sustainable penalty under Rule 15(4) of Cenvat Credit Rules 2004 read with Section 78 of Finance Act 1994 is not sustainable. Appeal allowed.
Issues:
1. Alleged erroneously availed CENVAT credit of input services 2. Demand of service tax with interest and penalties 3. Applicability of service category "Erection, Commissioning or Installation" to composite contracts 4. Demand related to service provided to American Power Corporation of India Ltd 5. Allegations of non-production of evidence for having paid Service Tax 6. Jurisdiction to challenge the payment of service tax by the service provider 7. Entitlement of recipient manufacturer to avail benefit of duty paid by supplier manufacturer 8. Validity of invoking extended period of limitation 9. Recovery of irregularly availed credit with interest 10. Applicability of Rule 2(l) of Cenvat Credit Rules 2004 Analysis: 1. The appellant, registered under taxable categories of "Management consultancy" and "Maintenance and repair services," faced allegations of erroneously availing CENVAT credit of input services. The Adjudication Authority confirmed the demand of duty with interest and penalties, leading to the present appeal. 2. The appellant argued that the demand for a specific period was covered by a Supreme Court judgment and was unsustainable. They also disputed the demand related to services provided to American Power Corporation and highlighted their compliance with service tax payments. 3. The Tribunal found that the demand for the first period was unsustainable based on the Supreme Court judgment. The demand for the subsequent period related to services provided to American Power Corporation was also deemed unsustainable due to lack of evidence supporting the allegations. 4. The Tribunal emphasized the appellant's entitlement to CENVAT credit based on previous judgments and rejected the demand against the credit availed. The jurisdiction's inability to question the credit without reopening the service provider's assessment was highlighted. 5. The validity of invoking the extended period of limitation was discussed, with the appellant arguing against its sustainability due to the absence of evidence regarding suppression or fraud. 6. The Revenue's argument that the credit availed by the appellant was irregular and needed to be recovered was rejected by the Tribunal. The Tribunal emphasized the legislative intent behind CENVAT credit rules to avoid cascading effects. 7. The Tribunal allowed the appeal, providing consequential relief based on the discussions and decisions on the issues raised during the hearing. The order was pronounced in open court on a specified date.
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