2025 (2) TMI 260 - AT - Service Tax

Denial of CENVAT Credit availed by the Appellant on the basis of Advice of Transfer Debit (ATD) - Liability to pay interest on the excess CENVAT Credit availed on capital goods in the first year itself - levy of penalty - Rent a cab service. Denial of CENVAT Credit availed on the basis of Advice of Transfer Debit (ATD) - HELD THAT - Appellant is a Government of India Undertaking providing the same services from different locations across the country. The same issue for denial of the credit availed by the appellant on the basis of Advice of Transfer Debit (ADT) was raised in the jurisdiction of the Salem Commissionerate. Matter was finally decided by the Chennai Bench BHARAT SANCHAR NIGAM LTD. ERODE VERSUS COMMISSIONER OF CENTRAL EXCISE SALEM 2013 (12) TMI 742 - CESTAT CHENNAI holding that It is true that assessee has not complied with provisions of CCR 2004 read with Central Excise Rules 2002 strictly. However I find that existence of original invoice and its genuineness is not disputed by Revenue. In fact such documents were produced before lower authorities. Therefore the duty involved has been paid and there is no dispute that the equipment in question has been used at the sites where credits were taken. In such circumstances considering the commercial practice which was necessary for efficient procuring the equipment in question this procedural lapse cannot be considered as a reason to deny Cenvat credit involved. Matter remanded back on this issue to the original authority to re-determine the admissibility of CENVAT Credit on the strength of ATD in terms of this decision of Hon ble High Court. Interest and penalty - HELD THAT - As the demand of the interest is completely linked with the admissibility of CENVAT Credit on the basis of the ATD for which the matter is being remanded back to the original this issue should be decided by the adjudicating authority on the basis of the findings arrived at by in respect of admissibility of CENVAT Credit - Further adjudicating authority should re-determine the issue of penalty on these credits after determining the admissibility of CENVAT Credit in remand proceedings as has been directed by the Hon ble High Court. CENVAT Credit on rent-a-cab service - HELD THAT - The issue of admissibility of CENVAT credit in respect of the Rent a cab service has also been decided by the Hon ble Bombay High Court in case of Solar Industries India Ltd 2021 (12) TMI 1047 - BOMBAY HIGH COURT holding as the Tribunal did not commit any error whatsoever in disallowing Cenvat credit to the appellant after 1-4-2011 in view of the amended provisions. The service provided was mere in the nature of personal service to its employees which is not permitted to be treated as input service . Thus in view of the above decision of Hon ble Bombay High Court affirmed by Hon ble Supreme Court the findings recorded in the impugned order upholding the denial of this credit affirmed. Conclusion - i) The matter regarding the denial of CENVAT Credit on ATDs is remanded back to the original authority for reconsideration. ii) The disallowance of CENVAT Credit on rent-a-cab services along with interest and penalties upheld. Appeal partly allowed and matter is remanded back to the original authority.

Summary

ISSUES PRESENTED and CONSIDERED

The core issues considered in this judgment are:

• Whether the denial of CENVAT Credit availed by the appellant on the basis of Advice of Transfer Debit (ATD) is sustainable.
• Whether the appellant is liable to pay interest on the excess CENVAT Credit availed on capital goods in the first year itself.
• Whether the appellant is entitled to CENVAT Credit on rent-a-cab services.
• Whether the demand for Service Tax on renting of immovable property is justified.
• Whether the penalties imposed under various sections of the Finance Act, 1994, and Cenvat Credit Rules, 2004, are justified.

ISSUE-WISE DETAILED ANALYSIS

Denial of CENVAT Credit on the Basis of ATD

• The relevant legal framework involves Rule 9(1) of the Cenvat Credit Rules, 2004, which specifies the documents required for availing CENVAT Credit. The appellant availed credit based on ATDs, which are not specified documents under this rule.
• The Court noted that the appellant had not produced original invoices or supporting documents to substantiate the CENVAT Credit claim, leading to the denial of credit.
• The appellant argued that the denial was based on procedural lapses and that the goods were used for providing taxable services. However, the Court found that the lack of valid documentation was not merely procedural but a substantive violation.
• The Tribunal referenced a similar case decided by the Chennai Bench, which allowed credit based on ATDs, but the Allahabad High Court had remanded the matter for re-evaluation of documentation.
• The Court remanded the issue back to the original authority for reconsideration based on the documents the appellant would submit, following the High Court's decision.

Interest on Excess CENVAT Credit

• Rule 4(2) of the Cenvat Credit Rules, 2004, allows only 50% of the credit on capital goods in the first year, with the balance in subsequent years.
• The appellant had availed 100% credit in the first year but claimed it was not utilized for tax payment, arguing against the interest demand.
• The Court upheld the interest demand, referencing precedents that require interest payment for excess credit availed, even if not utilized.
• The decision on interest is linked to the admissibility of CENVAT Credit on ATDs, which is remanded for further examination.

CENVAT Credit on Rent-a-Cab Services

• Rule 2(l) of the Cenvat Credit Rules, 2004, excludes rent-a-cab services from the definition of input services.
• The appellant argued that the cabs were used for business activities, such as transporting goods to remote exchanges, and should qualify as input services.
• The Court found that rent-a-cab services are explicitly excluded from input services, as upheld by the Bombay High Court and affirmed by the Supreme Court.
• The denial of credit on rent-a-cab services was upheld, as the appellant did not challenge this finding during the hearing.

Service Tax on Renting of Immovable Property

• The appellant did not dispute the demand for Service Tax on renting of immovable property, which was upheld by the Court.
• The Court noted that the appellant had accepted the liability but had not provided evidence of payment.

Penalties

• The imposition of penalties was not challenged by the appellant. However, the Court noted that the penalties related to the denial of CENVAT Credit on ATDs would depend on the outcome of the remand proceedings.
• The Court directed the adjudicating authority to reconsider penalties after determining the admissibility of CENVAT Credit.

SIGNIFICANT HOLDINGS

• The matter regarding the denial of CENVAT Credit on ATDs is remanded back to the original authority for reconsideration, following the High Court's directive.
• The demand for Service Tax on renting of immovable property and the disallowance of CENVAT Credit on rent-a-cab services, along with interest and penalties, are upheld.
• The Court emphasized the need for valid documentation to substantiate CENVAT Credit claims and the importance of adhering to procedural requirements.
• The appellant is directed to produce all supporting documents within 60 days, and the adjudicating authority is to decide the matter within three months.