2017 (2) TMI 16 - AT - Central Excise

CENVAT credit - manpower recruitment service - manpower recruitment service was utilized for maintenance of the factory, upkeep of garden and also assisting in canteen maintenance under Factories Act - security service - AMC service - Commercial construction service - Rent-a-cab service - penalty - Held that - manpower in factory maintenance and canteen maintenance is permissible since the maintenance of such organizations is a requirement of Factories Act. So far as upkeep of garden is concerned, that has no connection to the manufacturing activity for which no CENVAT credit on such count shall be permissible. Security service - Held that - the service being essential for the purpose of carrying on business, the CENVAT credit relating to such aspect is permissible. AMC service - Held that - the service not being utilized in manufacture of any goods, no CENVAT credit of the service tax paid in respect of such service is permissible. Commercial construction service - Held that - the service being carried out for the purpose of factory, CENVAT credit of the tax paid to avail such service is permissible. Imposition of penalty - Held that - there was no intention to cause evasion for which the penalty imposed would be harsh - penalty set aside. Rent-a-cab service - Held that - There is no evidence to substantiate the claim that the service so availed was in relation to manufacture. In absence of any integral connection and evidence, CENVAT credit of service tax paid on this service is not allowable - it was only misconception of law by the appellant to claim the benefit, there shall be no penalty. Appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Disallowance of CENVAT credit on manpower recruitment service, security service, AMC service, and commercial construction service.
2. Penalty imposition for alleged evasion in claiming CENVAT credit on rent-a-cab service.

Analysis:

Issue 1: Disallowance of CENVAT credit on various services
In the present appeal, the appellant contended that the disallowance of CENVAT credit on the manpower recruitment service utilized for factory maintenance, garden upkeep, and canteen maintenance under the Factories Act was incorrect in law. The Tribunal held that manpower recruitment for factory maintenance and canteen upkeep was permissible as it is a requirement under the Factories Act. However, the upkeep of the garden was deemed unrelated to manufacturing activities, thus no CENVAT credit was allowed for this service. Regarding the security service for verification of employee antecedents, it was considered essential for maintaining peace in the factory and conducting business peacefully, hence the CENVAT credit was allowed. The AMC service for air-conditioning maintenance in office premises was disallowed as it was not utilized in the manufacture of goods. Lastly, the commercial construction service for civil work in the factory was considered an essential input service, allowing CENVAT credit on the tax paid for such service.

Issue 2: Penalty imposition for alleged evasion
In another case, the appellant claimed CENVAT credit on the service tax paid for rent-a-cab service. The Tribunal found no evidence to substantiate that the service was related to manufacturing activities. As a result, the CENVAT credit on the rent-a-cab service was disallowed. However, considering that it was a misconception of law by the appellant rather than intentional evasion, no penalty was imposed. The appeal was allowed only in respect of confirming tax and interest leviable, with no penalty imposed due to the absence of contumacious conduct of evasion.

In conclusion, the Tribunal allowed the appeals to a substantial extent, except for the disallowance of CENVAT credit on specific services as detailed above. The penalty was not imposed in both cases due to the lack of evidence of intentional evasion, with the focus being on the legal compliance and relevance of services for claiming CENVAT credit.