2018 (2) TMI 1676 - AT - Service Tax

CENVAT credit - whether the appellant as a service provider, is required to discharge duty/ revers the Cenvat credit on the used capital goods cleared as scrap, during the period 2009-2010 to 2013-2014? - Held that - appellant had undisputedly cleared scrap of the capital goods used in providing output service during the period 2009-2010 to 2013-2014. Admittedly, the relevant Rule 3(5A) of CCR-2004 has been amended in 2012 and 2013. Prior to amendment to the said Rule effective from 01.4.2012, no liability could be fastened on the scrap of used capital goods by a manufacture or output service provider and after 27.9.2013 when the used capital goods were cleared as scrap, the liability to discharge duty was restricted to manufacturer and not service provider. However during the intervening period i.e. from March to 27.9.2013, the output appellant-service provider was required to pay duty on the transaction value of the scrap of used capital goods - the Appellant is not required to discharge duty on the scrap of capital goods except for the period from March to 27.09.2013. Penalty - Held that - appellant being a PSU and frequent changes in law resulted in to non-payment of duty during the relevant period which was later paid before issuance of notice, in my opinion, imposition of penalty is unjustified. Appeal allowed in part.

Summary

Issues involved:
Determining whether the appellant, as a service provider, is required to discharge duty/reverse the Cenvat credit on used capital goods cleared as scrap during the period 2009-2010 to 2013-2014.

Analysis:
The appellant, a provider of telecom services, availed Cenvat credit on capital goods used for providing output services. The appeal challenged a demand of ?6,81,000 for recovery of credit under Rule 3(5A) of Cenvat Credit Rules from 2009-2010 to 2013-2014. The appellant argued that due to amendments in Rule 3 of CCR-2004, they were only required to discharge duty from March 2012 to 27.09.2013. They contended that the demand for other periods was incorrect as per the amendments. The Commissioner (Appeals) upheld the denial of Cenvat credit/recovery of duty, but the appellant, being a PSU, claimed that penalties were unwarranted due to changing laws and essential services provided.

The Revenue supported the findings of the Commissioner (Appeals), while the appellant argued that they were only liable to pay duty on the scrap of capital goods for the period from March to 27.09.2013. The Tribunal noted that the relevant Rule 3(5A) was amended in 2012 and 2013, with different liabilities for manufacturers and service providers. The Tribunal found that the appellant correctly paid duty of ?4,05,807 on scrap cleared from March 2012 to 31.07.2013. Considering the appellant's PSU status and the changes in the law leading to non-payment of duty during the relevant period, the Tribunal deemed the penalty unjustified. Therefore, the Tribunal modified the order, upholding the duty payment of ?4,05,807 but setting aside the penalty imposed. The appeal was partly allowed based on these considerations.