2019 (5) TMI 1569 - AT - Service Tax

Liability of interest - excess utilization of CENVAT credit - Rule 6(5) of Cenvat Credit Rules, 2004 - HELD THAT - The appellant has provided the taxable services as well as exempted services. It is fact that during the impugned period, the appellant was providing taxable services and well exempted services but there is restriction for utilization of credit upto 20% lying in their Cenvat credit account. Admittedly, the appellant has availed the credit more than 20% during the impugned period. With effect from 1.4.2008, the appellant became entitled to avail credit lying in their Cenvat credit account - reliance placed in the case of MUMBAI INTERNATIONAL AIRPORT PVT. LTD. VERSUS COMMR. OF C. EX., MUMBAI-V 2014 (6) TMI 625 - CESTAT MUMBAI - the appellant is liable to pay interest from the date of utilization of Cenvat credit till 1.4.4008 - penalty also not imposable. CENVAT Credit - input services - guest services - staff welfare services - HELD THAT - The said services have been availed by the appellant for providing output services and the same have been availed in the course of their business of providing output services - the appellant is entitled is entitled to avail credit on guest house and staff welfare expenses - credit allowed. Appeal allowed in part.

Summary

Issues:
1. Denial of credit under Rule 6(5) of Cenvat Credit Rules, 2004.
2. Denial of credit on input services - guest services and staff welfare services.

Analysis:

Issue 1: Denial of credit under Rule 6(5) of Cenvat Credit Rules, 2004
The appellant appealed against the denial of credit under Rule 6(5) of Cenvat Credit Rules, 2004, and the denial of credit on input services. The Revenue contended that the appellant, engaged in providing taxable and exempted services, exceeded the 20% credit limit during the impugned period. The Revenue alleged that the excess credit availed needed recovery. The appellant argued that the restriction on credit utilization was lifted from April 1, 2008, and they were entitled to utilize the credit. The Tribunal referred to a decision stating that excess credit availed prior to April 1, 2008, would incur interest. The Tribunal held the appellant liable to pay interest for the period of excess credit utilization until April 1, 2008. The impugned order was set aside, and the appellant was directed to pay interest for the intervening period.

Issue 2: Denial of credit on input services - guest services and staff welfare services
Regarding the denial of credit on guest house and staff welfare expenses, the appellant argued that these services were utilized in providing output services and, therefore, credit should be allowed. The Tribunal referred to a decision of the Hon'ble Bombay High Court, stating that the appellant was entitled to avail credit on these expenses. Consequently, the credit could not be denied to the appellant. The appeals were disposed of based on these observations.

In conclusion, the Tribunal set aside the impugned order restricting credit utilization to 20% and directed the appellant to pay interest for the intervening period. The denial of credit on guest house and staff welfare expenses was overturned based on the decision of the Hon'ble Bombay High Court.