2015 (7) TMI 1039 - AT - Service Tax

Utilization of excess CENVAT Credit - appellant did not maintain separate accounts - Input services - Business Auxiliary Service - Held that - cap of 20% is applicable on the service tax payable and not on the service tax credit actually availed. What is restricted is only utilisation of the credit and not taking the credit per se; the credit taken could be carried forward. When the cap was removed on 01/04/2008, the appellant was eligible to utilise the credit also. In the present case what is involved is the utilisation of credit in excess of 20% of the tax payable during the impugned period which was permitted. Therefore, utilising the credit in excess of the limit would attract only interest liability. The entire service tax itself cannot be denied to the appellant. As no lapsing provision was incorporated and that the existing Rule 6(3) of the CENVAT Credit Rules does not explicitly bar the utilization of the accumulated credit, the department should not deny the utilization of such accumulated CENVAT credit by the taxpayer after 01/04/2008. Further, it must be kept in mind that taking of credit and its utilization is a substantive right of a taxpayer under value added taxation scheme. Therefore, in the absence of a clear legal prohibition, this right cannot be denied. - In view of the clarification given by the Board, recovery of the CENVAT credit wrongly taken cannot be sustained. What can be demanded is only interest on the wrongly availed credit from the date of utilisation of credit till 01/04/2008 when the assessee became entitled for the credit. Therefore, the adjudicating authority has to re-examine the matter in the light of the CBEC circular dated 21/11/2008. As regards the demand on the airline commission and airline incentive received, the demand has been made under the category of Business Auxiliary Services. These services have been rendered by the appellant to promote the business of the carriers (airlines) and, therefore, the classification under Business Auxiliary Service is prima facie sustainable and on the consideration received, the appellant is liable to discharge service tax liability. With regard to the CCX fee, here also the demand has been made under Business Auxiliary Service and the service has been rendered to the overseas companies by way of recovering amounts from the customers in India towards freight charges, to deliver documents such as delivery orders to the customers on behalf of the foreign principal and also to remit the amounts so collected to the overseas group company. These activities are clearly covered under Business Auxiliary Service and, therefore, the appellant is liable to discharge service tax liability on the consideration received under the said category. - Matter remanded back - Decided partly in favour of assessee.

Summary

Issues Involved:
Service tax demand confirmation, CENVAT credit denial, Break bulk fee taxation, Freight rebate taxation, Airline commission taxation, Airline incentive taxation, CCX fee taxation, Inadmissible credit demand.

CENVAT Credit Denial:
The appellant challenged the denial of CENVAT credit amounting to Rs. 2.85 crore, arguing that the cap of 20% applies to service tax payable, not credit availed. The appellant contended that post 01/04/2008, the credit could have been utilized. Referring to a CBEC circular, it was stated that only interest on excess credit utilization could be demanded, not the entire credit. The Tribunal directed a re-examination by the adjudicating authority in light of the circular.

Break Bulk Fee and Freight Rebate Taxation:
The appellant cited a Tribunal decision in their favor, asserting that the demand for service tax on break bulk fee and freight rebate was unsustainable. The Tribunal directed a re-examination by the adjudicating authority to consider the issue in line with the previous decision.

Airline Commission, Airline Incentive, and CCX Fee Taxation:
Regarding demands under Business Auxiliary Service for airline commission, airline incentive, and CCX fee, the Tribunal found the classification prima facie sustainable as services rendered to promote carriers' business. The appellant was directed to make a pre-deposit towards the confirmed service tax dues for these items.

Inadmissible Credit Demand:
The Tribunal directed a fresh examination by the adjudicating authority to determine if the procedural lapses affected the substantive benefit to the appellant. The appellant was instructed to make a pre-deposit towards confirmed service tax dues for certain items and comply with the adjudicating authority's directives.

This detailed analysis of the judgment highlights the key issues, arguments presented, Tribunal's observations, and directions given for each matter under consideration.