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2013 (1) TMI 142 - AT - Service TaxInput service distributor - Rule 2(m) of the CENVAT Credit Rules, 2004 CENVAT Credit on capital goods Capital goods installed at any other place - Business of providing telephone services - Discharge service tax liability separately on services rendered by different Secondary Switching Areas (SSAs) - each SSA is registered under Service Tax Laws - BSNL, Salem had taken CENVAT credit on certain equipments installed at other SSAs Revenue contended that such credit cannot be allowed because the equipments were not used in the premises of the entity paying service tax namely BSNL Salem - Assessee contended that the premises where the equipments are used belong to BSNL and not to any other party and it is also used for completion of services originating from Salem Held that - Basically the issue involved is one of procedures and not a case of mis-utilisation of any ineligible credit. Since MODVAT credit is a substantial benefit, we are of the view that the impugned credit should not be denied on account of procedural defects of minor nature as pointed out by the Revenue. Therefore, we hold that the impugned order is not maintainable. In favour of assessee BSNL may please note that the procedure laid down under the Rules are intended to be followed and cannot be circumvented by quoting different decisions of the Tribunal. There should be an earnest attempt on the part of BSNL to follow the procedure laid down in Relevant Rules
Issues Involved:
1. Denial of CENVAT credit on equipment installed in other Secondary Switching Areas (SSAs). 2. Interpretation of CENVAT Credit Rules, 2004 regarding the usage and eligibility of credit. 3. Compliance with procedural requirements for availing CENVAT credit. 4. Nexus between equipment usage and taxable services provided by the appellant. Issue 1: Denial of CENVAT credit on equipment in other SSAs: The appeal involved the denial of CENVAT credit by the Revenue on equipment installed in Secondary Switching Areas (SSAs) other than where the service tax liability was discharged. The Revenue proposed to disallow the credit on the grounds that the equipment was not used in the premises of the entity paying service tax. A service tax demand was confirmed for the period 2005-06 and 2006-07, along with a penalty under Rule 15 of the CENVAT Credit Rules, 2004. Issue 2: Interpretation of CENVAT Credit Rules, 2004: The Tribunal previously directed an examination of whether CENVAT credit on the same goods could be availed by other SSAs where the equipment was installed. The adjudicating authority found that the credit had been taken only once against the equipment installed. The argument presented was that the equipment was used by the output service provider for providing taxable service, and thus, CENVAT credit should not be denied. Issue 3: Compliance with procedural requirements: The appellant argued that since all SSAs belonged to the same legal entity, there was no requirement that the equipment used for providing output service should be installed in the premises of the assessee. The counsel contended that as long as the equipment was used for providing taxable service, CENVAT credit should not be denied. However, the Revenue emphasized the importance of complying with statutory formalities for availing CENVAT credit. Issue 4: Nexus between equipment usage and taxable services: The Tribunal noted that the equipment was used in the premises of the appellant and not moved out, establishing a nexus with the taxable services provided. It was highlighted that the equipment was integral to the services provided by the appellant, with calls originating from one SSA terminating in another, indicating a connection between the equipment usage and the taxable services. In the final decision, the Tribunal held that the impugned credit should not be denied due to procedural defects, as the issue primarily revolved around procedural matters rather than mis-utilization of credit. The order was set aside, and the appeal was allowed. However, a cautionary observation was made regarding the appellant's tendency to deviate from established procedures, emphasizing the importance of adhering to the rules and regulations laid down for availing CENVAT credit.
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