2017 (6) TMI 667 - AT - Service Tax

CENVAT credit - tele-communication services - capital goods - input services - The Revenue alleged that the appellant, in addition to the taxable service in relation to telephone connection are also providing the exempted services of the network access to other telephone service provider - invocation of Rule 6 (3) (c), of the CCR, 2004 - Held that - the identical issue for the previous period in the appellants own case has been examined by this Tribunal in the case of Idea Cellular Ltd 2009 (2) TMI 91 - CESTAT NEW DELHI , where it was held that Rule 6(3)(c) restricting utilization of credit for payment of service tax on output services to 20% of amount is attracted but such restriction is not applicable on capital goods credit & service tax credit in respect of 17 input services specified in Rule 6(5) - the present matter is also remanded back to the adjudicating authority for verification and re-quantification of demand for excess utilized credit - appeal allowed by way of remand.

Issues Involved:
1. Denial of Cenvat Credit availed by the appellants.
2. Applicability of Rule 6(3)(c) of the Cenvat Credit Rules, 2004.
3. Calculation and restriction of Cenvat Credit utilization.
4. Imposition of interest and penalties.

Detailed Analysis:

Denial of Cenvat Credit availed by the appellants:
The appellants, providing telecommunication services, availed Cenvat Credit on duty paid for capital goods and service tax on input services used for providing output services. The Revenue alleged that the appellants also provided exempted services, such as network access to other telephone service providers, for which they charged IUC charges, Tap out charges, and mobile terminating charges. As a result, the Revenue restricted the utilization of Cenvat Credit for payment of service tax to 20% under Rule 6(3)(c) of the Cenvat Credit Rules, 2004. The adjudicating authority confirmed the demand for the period April 2007 to May 2007, along with interest and equivalent penalty.

Applicability of Rule 6(3)(c) of the Cenvat Credit Rules, 2004:
The appellants contested the order, referring to a previous Tribunal decision in their case (Idea Cellular Ltd. Vs. CCE, Rohtak - 2009- (16) S.T.R. 712 (Tri.-Del.)), which remanded the matter for recalculation. The Tribunal had observed that the 20% cap on Cenvat Credit utilization under Rule 6(3)(c) did not apply to capital goods Cenvat credit and service tax credit for 17 input services specified under Rule 6(5).

Calculation and restriction of Cenvat Credit utilization:
The Tribunal agreed with the appellants' plea, noting that:
- Capital goods Cenvat credit is permissible if the goods are used for both taxable and exempted services.
- Service tax credit for 17 specified input services is available unless exclusively used for exempted services.
- The Tribunal cited a Board Circular clarifying that the 20% restriction does not apply to these 17 services or capital goods credit, as they are used for overall activities and cannot be apportioned to specific services.

Imposition of interest and penalties:
The Tribunal remanded the matter back to the adjudicating authority for verification and recalculation of the demand, considering the exclusion of capital goods credit and the specified 17 services from the 20% restriction. It was noted that if no demand arises after recalculation, no penalty should be imposed on the appellants.

Conclusion:
The appeal was disposed of by remanding the case to the adjudicating authority for verification and re-quantification of the demand, ensuring compliance with the Tribunal's observations regarding the non-applicability of the 20% restriction on certain credits. The adjudicating authority is to pass a fresh order in accordance with the law.

← Previous Next →