2016 (12) TMI 397 - AT - Service Tax

Cenvat Credit - credit of CVD paid on import of capital goods being mobile phones - nexus between these and the output service - extended period of limitation - Held that - The rules are stringent in requiring the retention of capital goods at the factory of production but acknowledges that capital goods used for rendering of service may have to be taken outside the premises. - There is no allegation that the fixed wireless phones were not received at the premises of the appellant. Indeed, it would have been well nigh impossible for the appellant to have provided the phones to subscribers from some other premises. This aspect has not been considered in the impugned order. Flexibility in assigning a meaning to the expression premises should have found a place in the impugned order. The lack thereof may be attributed to the digression to matters not contemplated in the notice. This want of proper disposal of the show cause notice must be remedied before we can take a decision on the legality and propriety of the disposal of the allegations in the show cause notice. Demand set aside - Matter remanded back.

Issues:
1. Disallowance of CENVAT credit on additional duty of customs paid on import of 'fixed wireless phones'.
2. Applicability of extended period under the proviso to section 73(1) of Finance Act, 1994.
3. Nexus between 'fixed wireless phones' and output service for availing CENVAT credit.
4. Interpretation of rule 3(1) and rule 3(5) of CENVAT Credit Rules, 2004.
5. Ownership and possession of 'fixed wireless phones' affecting entitlement to CENVAT credit.
6. Definition of 'premises' in the context of service provision and equipment installation.
7. Compliance with statutory provisions regarding the receipt of capital goods at service provider's premises.
8. Consideration of commercial realities and flexibility in interpreting 'premises' for capital goods used in service provision.
9. Proper disposal of show cause notice allegations and applicability of cited decisions on the matter.

Analysis:

1. The case involved the disallowance of CENVAT credit on additional duty of customs paid on the import of 'fixed wireless phones' by M/s Tata Tele Services (Maharashtra) Ltd. The Commissioner of Service Tax-II, Mumbai demanded the disallowed amount under the Finance Act, 1994, along with interest and penalty. The appellant contested the order, citing erroneous findings in the impugned order.

2. The issue of invoking the extended period under the proviso to section 73(1) of the Finance Act, 1994 was raised. The appellant argued against this, while the respondent cited relevant case law to support the extended period's applicability.

3. The tribunal discussed the nexus between the 'fixed wireless phones' and the output service provided by the appellant. The eligibility of availing CENVAT credit was questioned based on the lack of connection between the phones and the services rendered.

4. Interpretation of rule 3(1) and rule 3(5) of the CENVAT Credit Rules, 2004 was crucial. The contraventions were related to the removal of capital goods without payment and the conditions for availing credit, which were examined in detail.

5. Ownership and possession of the 'fixed wireless phones' were highlighted as factors affecting the appellant's entitlement to CENVAT credit. The argument that lack of possession deprives credit eligibility was contested based on legal precedents and interpretations.

6. The definition of 'premises' in the context of service provision and equipment installation was debated. The appellant's contention regarding subscriber premises being an extension of the appellant's premises was refuted, emphasizing the legal distinction between the two.

7. Compliance with statutory provisions regarding the receipt of capital goods at the service provider's premises was analyzed. The tribunal noted the importance of goods being received at the designated premises for availing CENVAT credit.

8. The tribunal discussed the need for flexibility in interpreting 'premises' concerning capital goods used in service provision. Commercial realities and practical considerations were deemed essential in determining the applicability of credit rules.

9. The importance of proper disposal of show cause notice allegations and the consideration of cited decisions on the matter were emphasized. The tribunal set aside the impugned order and remanded the case for a fresh decision based on the allegations in the show cause notice and relevant legal interpretations.

This detailed analysis covers the various issues addressed in the judgment, providing a comprehensive overview of the legal considerations and arguments presented in the case.

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