2016 (3) TMI 527 - AT - Service Tax

Cenvat credit availed on common input services for rendering taxable output services - Held that - Internet service, web-hosting service and content service is wholly attributable to the activity of rendering taxable output service. Thus, the demand attributable to these input services is set aside. So far renting of premises is concerned, it is evident that the space provided on 2nd Floor of the same building is for the exempt activity of publishing of books and CDs, have been provided without rent in consideration of the rent paid ₹ 40/- per Square fit vide the separate agreement for 2083 Square/ft. Therefore, the this issue is remanded back. Imposition of penalty - Rule 15 (3) of CC Rules, 2004 - Held that - the appellants have co-operated with the revenue by providing the information, requisitioned from time to time. So, the issue is of interpretation of the statutes and no case is made out of deliberate default or contumacious conduct on the part of the appellant. Therefore, by taking a lenient view, the penalty is reduced under Rule 15 (3) of the Cenvat Credit Rules. - Decided partly in favour of appellant

Summary

Issues:
Cenvat credit availed on common services for rendering taxable output services and clearance of exempt goods.

Analysis:
The appellant, a publisher of law books and CDs, also provides online information and database services. The issue revolves around the utilization of common input services for manufacturing exempt goods and providing taxable output services without paying the required percentage or availing Cenvat credit as per rules. The show cause notice proposed to bifurcate common input services for a specific period, leading to a demand of a certain amount along with penalties and interest. The appellant contested the notice, claiming that certain services were exclusively attributable to taxable output services. They admitted liability for some common services and made payments accordingly before the order in appeal.

On appeal before the Commissioner, the appellant argued that services like Internet service and content service were solely for taxable services, and renting of immovable property was exclusively for taxable output services based on separate agreements. However, the Commissioner held that these services could not be exclusively used for taxable services. The appeal was dismissed based on the Commissioner's findings.

The appellant then appealed to the Tribunal, arguing that certain services were wholly attributable to taxable output services and should not be considered common input services. They also provided details about the renting of premises and requested a waiver of the balance demand and penalty. The revenue department supported the impugned order and sought dismissal of the appeal.

The Tribunal found that Internet service, web-hosting service, and content service were wholly attributable to taxable output services, setting aside the demand related to these services. Regarding renting of premises, the Tribunal remanded the issue to ascertain the space occupied for exempt activities and directed a redistribution of rent accordingly. The penalty was reduced considering the appellant's cooperation and lack of deliberate default or misconduct.

In conclusion, the appeal was partially allowed and partially remanded. The appellant was directed to appear before the adjudicating authority within a specified period for further proceedings.