2014 (7) TMI 580 - AT - Service Tax

Irregular availment of CENVAT Credit - Availment of credit for Unit I and Unit III - non distribution of input service credit by the Head office - Penalty u/s 11AC - Held that - The registered office and Vatva office both are located in the same place and appellant has simply utilized the credit at Vatva instead of distributing it to various units. As submitted by the learned counsel, during the relevant period, there was no restriction for utilization of such credit without allocating proportionately to various units. The omission to take registration as an Input Service Distributor can at best be considered as procedural irregularity and in view of the decisions cited, has to be considered sympathetically. Further, it is also noticed that appellant has not got any extra benefit by doing this. In fact from the statement of Shri Chandresh C. Shah, as explained that above Cenvat credit available to them, 20% of service tax payable only was paid and balance was paid in cash. In fact, proper distribution would have enabled them to utilize full credit. It would show that the exercise is totally Revenue neutral and no loss has been caused to the Revenue (in fact Revenue has gained). In the absence of any legal requirement to avail credit based on the services received during the relevant time the procedural irregularity has to be ignored and the demand confirmed has to be set aside on this ground - it is not the case of the department that the credit was not at all admissible. The case of the department is that the credit is admissible but should have been taken in Unit-3. - Following decision of Doshion Ltd. 2012 (10) TMI 952 - CESTAT AHMEDABAD - Assessee made out a case in their favour - demand for Cenvat credit with interest and penalty equal to the same imposed under Section 11AC of Central Excise Act, 1944 are set aside - Decided in favour of assessee.

Summary

Issues: Recovery of irregularly availed service tax credit, invocation of extended period for demand, nexus between service and activity for credit availed, binding precedent of decisions, admissibility of CENVAT credit in different units.

Recovery of Irregularly Availed Service Tax Credit:
The judgment addresses the issue of irregularly availed service tax credit by an appellant for rent paid for a different unit. The internal audit revealed that the appellant had taken service tax credit for one unit in respect of services paid for another unit. The judgment states that the appellant had irregularly availed service tax credit, necessitating recovery of the amount along with interest. Proceedings were initiated to recover the CENVAT credit, leading to the confirmation of the demand with interest and penalty under Section 11AC of the Central Excise Act, 1944.

Invocation of Extended Period for Demand:
The appellant argued against the invocation of the extended period for demand, citing lack of motive or intention to evade tax payment. The appellant contended that since the credit was taken before the issuance of the show-cause notice and there was no intent to suppress or misdeclare, the extended period should not have been invoked. The judgment considered the appellant's arguments regarding the timing of the credit taken and the absence of any deliberate evasion, ultimately setting aside the demand based on the extended period.

Nexus Between Service and Activity for Credit Availed:
The judgment discusses the requirement of a nexus between the service and the activity undertaken in the unit for which credit has been taken. It references a Tribunal decision in another case to emphasize the importance of establishing a connection between the service and the unit where the credit is availed. The judgment evaluates the arguments presented by both sides regarding the utilization of credit without proper allocation and the procedural irregularity in distributing the credit among different units.

Binding Precedent of Decisions:
The judgment distinguishes between binding precedent and non-binding decisions, highlighting that certain decisions do not set binding precedents. It references a case where the High Court took a view against the appellant but clarifies that the issue in the present case was different. The judgment emphasizes the relevance of precedent decisions of the Tribunal in determining the outcome of the appeal, ultimately allowing the appeal in favor of the appellant based on the established precedent.

Admissibility of CENVAT Credit in Different Units:
The judgment delves into the admissibility of CENVAT credit in different units, specifically addressing the case where the department argued that the credit should have been taken in a specific unit. The judgment analyzes the department's stance that the credit was admissible but should have been allocated to a different unit. By referencing precedent decisions and the specific circumstances of the case, the judgment concludes that the appellant had a valid case in their favor, ultimately allowing the appeal with consequential relief, if any, to the appellant.