2017 (7) TMI 285 - AT - Central Excise

CENVAT credit - activity of replacement of roof - whether the appellant is eligible to availed CENVAT credit of service tax paid by them to service provider? - Held that - appellant may have entertained bonafide belief that they were eligible for availment of CENVAT credit hence the activity of availing of CENVAT credit cannot be held as with malafide intention to evade the duty liability. Accordingly, it is to be held that the penalty imposed in this appeal is unwarranted - CENVAT credit of the service tax on the service rendered by the service provider being an activity of replacement of roof, demands are confirmed with interest but the penalty imposed is set aside - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Whether the appellant is eligible to avail CENVAT credit of service tax paid by them to the service provider.

Analysis:
The dispute revolved around the CENVAT credit related to activities like replacement of roof, fabrication of steel structure, and civil repair works. The First Appellate Authority acknowledged the breakdown of credit provided by the appellant but raised no dispute on its accuracy. The core issue was the eligibility of CENVAT credit for service tax paid on the replacement of the roof. The authorized representative argued that the services rendered by the service providers fell under modernization, replacement, and repair covered by the CENVAT Credit Rules. Invoices indicated work done for replacement of AC roof sheets.

The lower authorities supported the denial of CENVAT credit, while the First Appellate Authority set aside the Order-in-Original for specific items in the table of activities. The appellate judge noted that the appellant's arguments did not advance the case, as the work awarded to the service provider fell under a works contract, with service tax liability discharged. The Departmental Representative cited precedent supporting their position. The issue in question pertained solely to the eligibility of CENVAT credit for service tax paid on roof replacement.

While the appellant's representative argued for the absence of malafide intent in claiming CENVAT credit, the judge found no merit in the appeal. However, the judge agreed that the penalty was unwarranted due to the appellant's genuine belief in eligibility for the credit, leading to the penalty being set aside. Ultimately, the appeal was rejected concerning the eligibility for CENVAT credit on roof replacement services, with confirmed demands and interest, but the penalty was overturned.

In conclusion, the judgment upheld the denial of CENVAT credit for the service tax on roof replacement services, confirmed demands with interest, and set aside the penalty due to the appellant's genuine belief in eligibility. The appeal was disposed of accordingly.