2017 (9) TMI 292 - AT - Central Excise

Scope of SCN - CENVAT credit - input services - aircraft hiring charges - the legal services obtained from abroad - case of appellant is that the SCN issued to them did not allege that there was no nexus between these services and output service. He argued that the SCN in respect of credit of service tax on aircraft hiring charges was solely based on the definition of input service - The order-in-original as well as the impugned order goes into the lack of nexus while denying the Cenvat Credit on these services - Held that - the Hon ble Apex Court in the case of Sun Pharmaceuticals Industries Ltd. 2015 (12) TMI 670 - SUPREME COURT has held that it is not open to Revenue to go beyond the show-cause notice issued to them. Revenue cannot go into the issue of nexus between the input service and the output services - Revenue sought to distinguish this decision relying on the fact that in the case of credit, the onus of proving nexus between the input, input service and output service is on the claimant. He however could not point out any allegation regarding lack of nexus between input service and output service. Since both the lower authorities have travelled beyond the allegations in the notice, the impugned order is set aside - appeal allowed by way of remand to decided afresh.

Summary

Issues:
1. Denial of Cenvat Credit on aircraft hiring charges and legal services obtained from abroad.

Analysis:
The appellant, M/s. ISMT Ltd., filed an appeal against the denial of Cenvat Credit on certain services, specifically aircraft hiring charges and legal services obtained from abroad. The appellant argued that the denial of credit was not based on any lack of nexus between the services and output service as alleged in the show-cause notice. Regarding the aircraft hiring charges, the appellant contended that the exclusion clause (b) of the definition of input service did not apply as aircraft did not fall under the category of a motor vehicle. Additionally, the denial of credit for legal services was based on Rule 5 of the Taxation of Services Rules, which the appellant argued did not prohibit them from availing Cenvat Credit on reverse charge basis. The appellant also highlighted that they had taken these credits based on the distribution by Input Service Distributor (ISD) and cited relevant case laws to support their argument.

The Revenue, represented by the Assistant Commissioner, argued that the issue of the order going beyond the show-cause notice was not raised before the Commissioner (Appeals) and therefore could not be raised before the Tribunal. The Revenue pointed out that Rule 14 of the Cenvat Credit Rules only allowed recovery of duty from the manufacturer or service provider, not from the ISD. The Revenue also mentioned that during the investigation, evidence regarding the use of aircraft for official purposes was not provided by the appellant, although this was not part of the show-cause notice. The Revenue contended that the notice was issued to both the manufacturer and the ISD.

The Tribunal, after considering the submissions from both parties, observed that the show-cause notice was limited to specific issues. It noted that the denial of credit for aircraft hiring charges was based on the exclusion clause (b) of the input service definition, and there was no mention of lack of nexus in the notice. Similarly, the denial of credit for legal services was solely based on Rule 5 of the Taxation of Services Rules. The Tribunal referred to relevant case laws to emphasize that going beyond the allegations in the notice was impermissible. As both lower authorities had exceeded the scope of the notice, the Tribunal set aside the impugned order and remanded the case to the original authority to decide solely on the issues raised in the notice.