2010 (8) TMI 405 - AT - Service Tax

Denial of input service credit - duty paying documents - debit-notes - penalty - held that - appellate authority has rightly denied the input service credit to the appellants, which they have taken on the strength of debit notes - As per Rule 9(1)(i) of the Cenvat Credit Rules, 2004, the credit can be availed on the strength of invoice, supplementary invoice, challan or bills of entry - Demand confirmed - penalty reduced.

Summary

Issues:
Challenge to denial of input service credit and penalty under Rule 15 of the Cenvat Credit Rules, 2004.

Analysis:
The appellants contested the denial of input service credit amounting to Rs. 7,327/-, based on debit notes, and a penalty of Rs. 20,000/- under Rule 15 of the Cenvat Credit Rules, 2004. Despite no representation from the appellant and no request for adjournment, the matter was taken up for final disposal on merits due to the small amount involved. It was established that the appellants had indeed claimed the input service credit using debit notes, which was disallowed by the lower authorities.

The Learned DR argued that Rule 9(1) of the Cenvat Credit Rules, 2004 specifies the necessary documents for availing Cenvat credit, including invoices, challans, supplementary invoices, and bills of entry, with no provision for using other documents. Consequently, the denial of Cenvat credit was deemed appropriate. Upon reviewing the submissions and records, it was concluded that the lower appellate authority correctly rejected the input service credit claimed by the appellants through debit notes. Rule 9(1)(i) of the Cenvat Credit Rules, 2004 mandates that credit can only be availed based on specified documents like invoices, supplementary invoices, challans, or bills of entry. Therefore, the denial of input service credit was upheld, and the demand was confirmed.

Regarding the penalty under Rule 15 of the Cenvat Credit Rules, 2004, it was noted that the lower authorities did not provide a rationale for imposing a penalty of Rs. 20,000/-. Rule 15 stipulates that the penalty should be equivalent to the duty amount or Rs. 2,000/-, whichever is greater, at the discretion of the penalizing authority. In this case, the penalty imposition was deemed arbitrary, leading to a reduction of the penalty to Rs. 2,000/- only. The appeal was disposed of with these findings, affirming the denial of input service credit while modifying the penalty amount.