2018 (7) TMI 167 - AT - Central Excise

CENVAT Credit - input services - Vehicle Insurance - Construction related services i.e., false ceiling/partition works - Installation services used for ineligible capital goods - Works contract services used for construction related works - Held that - In the definition of input services, the credit on vehicle insurance claimed by them is covered by exclusion clause (B) above, while the credit on construction related services and works contract services fall is covered under (A) above as it falls under sub-clause (zzzza) of clause (105) of Section 65 of the Finance Act. The civil construction work undertaken was in the nature of composite works contract with some amount being added as sale of goods and VAT being paid and for the remaining amount, service tax being paid, considering it as the service element of the composite works contract - The appellant had argued earlier that they can prove through agreements, the contracts which they had with their service providers do not fall under the category of works contract. But they have not produced any such agreements and the invoices show that they were works contracts - Thus, appellant have no evidence to show that these invoices do not pertain to works contract. Time limitation - Held that - The appellant had disclosed the full value of the credit which they have taken in the ER-1, but they have not disclosed the components of the credit which they have taken. The ER-1 during the relevant period also did not provide details of the credit taken - the extended period of time under Section 11A can be invoked. Appeal dismissed - decided against appellant.

Issues:
1. Failure of the appellant to appear in the proceedings.
2. Eligibility of CENVAT credit on input services.
3. Imposition of penalty and interest on the appellant.
4. Interpretation of Rule 2(l) of the CENVAT Credit Rules, 2004.
5. Determination of whether the appellant disclosed the full value of credit taken.

Issue 1 - Failure to Appear:
The appellant repeatedly failed to appear in the proceedings despite multiple adjournments. The tribunal found the appellant not serious in pursuing the matter and proceeded to decide on merits.

Issue 2 - Eligibility of CENVAT Credit:
The appellant, a manufacturer of bulk drugs, availed CENVAT credit on input services like vehicle insurance, construction-related services, and works contract services. The department contended these were not eligible. The tribunal noted that the appellant failed to produce agreements supporting their case and upheld the department's decision.

Issue 3 - Penalty and Interest Imposition:
Following due process, the Joint Commissioner confirmed the demand, interest, and penalty, which was later reduced by the Commissioner (Appeals). The appellant appealed against this decision, arguing they were eligible for credit and not liable for penalty or interest. However, the tribunal upheld the penalties and interest imposed.

Issue 4 - Interpretation of Rule 2(l) of CENVAT Credit Rules:
The tribunal analyzed Rule 2(l) of the CENVAT Credit Rules, which defines input services. The rule excludes certain services, including those related to construction or works contracts. The tribunal found that the services for which the credit was claimed fell within the excluded categories, as evidenced by the nature of the invoices.

Issue 5 - Disclosure of Full Value of Credit:
The appellant disclosed the full value of credit taken in ER-1 filings but did not provide details of the components of the credit. The tribunal held that the appellant violated Rule 2(l) by taking credit they were not entitled to, leading to duty evasion. Consequently, the extended time period under Section 11A was invoked, justifying the imposition of fines and interest.

In conclusion, the tribunal rejected the appeal, upholding the Order-in-Appeal and the penalties imposed on the appellant for availing ineligible CENVAT credit on input services.

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