2010 (4) TMI 330 - AT - Service Tax

Cenvat Credit- In this case disallowed the Cenvat Credit in respect of service tax paid on cellular phone services and second ground of disallowance of credit on account of payment of service tax for availing insurance services on the strength of photocopy of insurance policy. Held that- credit on cellular phone rightly disallowed but service tax on insurance service is concerned, the appellant if produces relevant documents having force of evidence, the authority shall re consider its claim. Thus the appeal partly allowed.

Summary

Issues:
1. Stay application for duty demand and penalty.
2. Disallowance of Cenvat credit for service tax on cellular phone services.
3. Disallowance of Cenvat credit for service tax on insurance services.
4. Imposition of penalty for erratic use of Cenvat credit.

Analysis:
1. The appellant filed a Stay Application for a duty demand of Rs. 12,897/- and penalty of Rs. 1,60,718/- on two counts. The first count involved disallowance of Cenvat credit of Rs. 2,013/- for service tax paid on cellular phone services when the bill was not in the name of the assessee. The second count was disallowance of credit of Rs. 10,884/- for service tax on insurance services based on a photocopy of the insurance policy. The appellant sought waiver of pre-deposit, arguing that there was evidence to support allowing the Cenvat credit and that the penalty was unreasonably imposed.

2. The Adjudicating Authority applied the inadmissibility and relevancy test, following the Supreme Court's ruling in Maruti Suzuki Ltd. v. [Case citation] to disallow the Cenvat credit for service tax on cellular phones. The Tribunal found the authority justified in disallowing the claim, indicating that the appellant did not meet the required criteria for claiming the credit.

3. Regarding the disallowance of Cenvat credit for service tax on insurance services, the Tribunal directed that if the appellant provides relevant documents as evidence, the authority should reconsider the claim. The Tribunal emphasized that if the service tax was paid on the input service meeting all necessary criteria, the claim would be deemed admissible upon review by the authority.

4. The Tribunal noted that no mala fide intent was established by the authorities to support the imposition of the penalty for erratic use of Cenvat credit. Consequently, the appellant was granted full relief on this count. The appeal was allowed in part, remanding the matter to the adjudicating authority for a reassessment of the set off of service tax paid against the ultimate duty liability. The Stay Application was disposed of accordingly.

This comprehensive analysis of the judgment provides a detailed overview of the issues raised, the arguments presented by both parties, and the Tribunal's reasoning and decision on each issue.