2016 (7) TMI 1208 - AT - Service Tax

Cenvat Credit of service tax paid under reverse charge method - import of business auxiliary services from group compaines abroad and GTA services - the service tax was paid by the appellant through e-payments by the head office - debit notes - duty paying documents - Held that - debit notes and e-payment challans are valid documents for claiming CENVAT credit on input services as per Sub-rule (1)(e) of Rule 9 which clearly specifies that CENVAT credit can be availed on challan evidencing payment of service tax by the service recipient as a person liable to pay service tax. Regarding GTA services appellant failed to produce documents showing how much of it was for inward transportation of inputs and how much for outward transportation of finished products. The appellants have rightly taken CENVAT credit of 12, 19, 140/- on the basis of debit notes and 4, 24, 878/- on the basis of e-payment challans and disallow CENVAT credit taken on GTA services of 87, 132/- The question of penalty does not arise as the appellants have not concealed any material facts from the Respondent. - Decided partly in favor of assessee.

Issues:
1. Denial of CENVAT credit based on debit notes and e-payment challans.
2. Merger of entities and its impact on service tax liability.
3. Validity of service tax payment on management consultant services and GTA services.
4. Disallowance of CENVAT credit on GTA services due to lack of documentation.
5. Imposition of penalty on the appellant.

Issue 1: Denial of CENVAT credit based on debit notes and e-payment challans:
The appeal contested the rejection of CENVAT credit by the Commissioner(Appeals) based on debit notes and e-payment challans. The appellant argued that the denial was erroneous in law and not sustainable. The appellant highlighted that the merger of entities resulted in a single entity where service tax was not payable. The Tribunal found that the denial of credit solely based on the documents was not justified as the eligibility of services as valid input services was not challenged in the show-cause notice. The Tribunal referred to legal precedents and held that the documents were valid for claiming CENVAT credit under the CENVAT Credit Rules 2004. Consequently, the Tribunal partly allowed the appeal, affirming the appellant's right to CENVAT credit based on the mentioned documents.

Issue 2: Merger of entities and its impact on service tax liability:
The Tribunal examined the merger of entities and its impact on service tax liability. It was established that the merger resulted in a single entity from a legal perspective, where any service provided would be considered as service to self, eliminating the service tax liability. Legal precedents and the decision of Commissioner of Service Tax Delhi Vs ITC Hotels Ltd were cited to support this position. The Tribunal concluded that in such circumstances, the requirement to discharge service tax did not arise, and hence, CENVAT credit could not be denied based on the lack of details in the documents.

Issue 3: Validity of service tax payment on management consultant services and GTA services:
The validity of service tax payment on management consultant services and GTA services was contested. The appellant argued that the denial of credit on these grounds was beyond the scope of the show-cause notice and contrary to established legal principles. The Tribunal examined the nature of these services and determined that the appellant was entitled to CENVAT credit on management consultant services under reverse charge mechanism. However, the Tribunal disallowed the credit on GTA services due to insufficient documentation regarding the allocation of service tax for inward and outward transportation.

Issue 4: Disallowance of CENVAT credit on GTA services due to lack of documentation:
The Tribunal addressed the disallowance of CENVAT credit on GTA services due to inadequate documentation. While the appellant paid service tax on GTA services under reverse charge mechanism, the lack of clear documentation regarding the allocation of service tax for inward and outward transportation led to the disallowance of credit. The Tribunal emphasized the importance of maintaining proper documentation to support CENVAT credit claims.

Issue 5: Imposition of penalty on the appellant:
The Tribunal discussed the imposition of a penalty on the appellant for suppression of facts. However, it was noted that the issue in question involved the interpretation of law rather than concealment of material facts. As a result, the Tribunal held that no penalty could be imposed in such cases. The appellant's belief in their entitlement to CENVAT credit based on debit notes and e-payment challans was considered bona fide. Therefore, the Tribunal partly allowed the appeal, ruling out the penalty and focusing on the interpretation of legal provisions.

In conclusion, the Tribunal partially allowed the appeal, affirming the appellant's right to CENVAT credit based on valid documents while disallowing credit on GTA services due to insufficient documentation. The impact of the merger on service tax liability was crucial in determining the eligibility for CENVAT credit, and the Tribunal emphasized the importance of proper documentation in supporting credit claims. The penalty was ruled out considering the nature of the issue involved.

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