2015 (12) TMI 605 - AT - Service Tax

Disallowance of CENVAT Credit - Renting of Immovable Property service as input service - Authorized service station service being output service - Held that - appellant took service tax registration for Authorized Service Station only on 28.03.2008. The premises for running the service station was taken on rent prior to taking registration. Appellant availed credit for the rent paid during the period prior to taking registration and prior to providing output services by the authorized service station. It is submitted by the learned counsel for appellant that the first invoice of authorized service station was issued on 7.9.2008. These dates demonstrate that credit was availed for the tax paid on the input service prior to providing output service. Rule 2 (l) of the Cenvat Credit Rules define input service as any service used by a provider of taxable service for providing an out put service. When the appellant has started providing output service only on 7.9.2008, renting of immovable property prior to 7.9.2008 is not eligible for credit. The credit, in my view has been rightly denied. - impugned order is modified to the extent of reducing the penalty imposed to 25% of the duty demand - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of credit on Renting of Immovable Property service availed prior to registration.

Analysis:
The appeal in question challenges the disallowance of credit on Renting of Immovable Property service that was availed before the appellant obtained registration. The appellant, registered for providing Authorized Service Station and Business Auxiliary Services, mistakenly claimed Cenvat credit on invoices issued before registration for Renting of Immovable Property Service. A show cause notice was issued, leading to an Order-in-Original confirming the disallowance of credit, tax recovery with interest, and penalties. The Commissioner (Appeals) waived a penalty but upheld the rest, prompting the appellant to appeal to the Tribunal.

It is established that the appellant acquired service tax registration for Authorized Service Station after renting the premises for the station. The appellant claimed credit for rent paid before registration and before providing output services. The Tribunal noted that Rule 2(l) of the Cenvat Credit Rules defines 'input service' as a service used for providing an output service. As the appellant began providing output service after the renting period, the credit for renting of immovable property before that date was rightfully denied.

Regarding the imposition of penalties, the appellant argued against time-barring and invoked the absence of willful misstatements to evade duty. The Department contended that the incorrect credit claim was discovered during an audit, indicating suppression of facts to evade duty. The appellant, being a new assessee, claimed ignorance as the reason for the error and sought full penalty waiver. The Tribunal, while acknowledging the appellant's deposit of service tax and interest, reduced the penalty to 25% of the duty demand to serve justice.

In conclusion, the Tribunal modified the impugned order by reducing the penalty to 25% of the duty demand. The appeal was partly allowed on these grounds.