2019 (9) TMI 1139 - AT - Central Excise

CENV AT credit - input services - Catering Services attributable to EOU by the appellant DTA - proportionate reversal of Cenvat Credits on recovery made from the employees towards such Canteen/Catering Services - HELD THAT - It is the settled principle of law that service tax paid on catering and house-keeping services are eligible input credits before negative list came into force, for which both in order-in-appeal and order-in-original, the credits were held to be admissible. Cursory reading of Sub Rule 4 of Rule 12 A would indicate that Cenvat Credit available with one of registered manufactured premises can be used by other such registered manufactured premises and if the transfer is done from the premises providing taxable service, the other registered premises should also be providing taxable service and not vice versa, which is applied by the authorities below and argued by Learned Authorised Representative - thus there is no hesitation to say that the credit attributable to the EOU could be taken and utilised by the appellant DTA. CENVAT Credit - recovery made from employees towards canteen service - HELD THAT - Such availment of credit is not admissible - issue decided in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., 2010 (10) TMI 13 - BOMBAY HIGH COURT . Extended period of limitation - Penalty - HELD THAT - Considering the unsettled position of law on the issue of admissibility and inadmissibility of credits on catering and house-keeping services, extended period cannot be invoked but since the 2nd show cause notice is confined to the normal period and even show cause notice does not indicate malafide intention on the part of the appellant to avail ineligible credit, confirmation of penalty u/s 78 by the Commissioner (Appeals) cannot be said to be in accordance with the provisions of the Rule. Appeal allowed in part.

Summary

Issues:
Confirmation of order demanding duty on Cenvat Credit awaited on Catering Services attributable to EOU by the appellant DTA and ordering for proportionate reversal of Cenvat Credits on recovery made from the employees towards such Canteen/Catering Services.

Analysis:

1. Issue of Cenvat Credit on Catering Services:
The appellant, a Large Tax Payer Unit (LTU), received catering and house-keeping services at the factory premises for both Export Oriented Unit (EOU) and Domestic Tariff Area (DTA). The demand for duty on Cenvat Credit awaited on Catering Services attributable to EOU by the appellant DTA was contested. The appellant argued that the issue was covered by relevant legal precedents, including a decision by the Hon’ble Karnataka High Court. The appellant also highlighted the permissibility of transferring credit between units under Rule 12A of Cenvat Credit Rules 2004. The Tribunal observed that the credits were admissible before the negative list regime and ruled in favor of the appellant, allowing the transfer of credit from EOU to DTA.

2. Issue of Recovery from Employees for Canteen Services:
The demand on recoveries made from employees towards canteen services was also challenged. The appellant cited conflicting decisions by different benches of CESTAT regarding the admissibility of credits on such recoveries. The Tribunal referred to a decision by the Hon’ble Bombay High Court, which clarified that such availment of credit is not admissible. However, due to the unsettled legal position on this issue and the absence of malafide intention by the appellant, the Tribunal held that the extended period could not be invoked. Consequently, the confirmation of penalty under Section 78 of the Finance Act 1994 by the Commissioner (Appeals) was set aside.

Conclusion:
The appeal was partially allowed, and the penalty imposed under Section 78 of the Finance Act 1994 was set aside. The Tribunal’s decision provided clarity on the admissibility of Cenvat Credit on Catering Services and recovery from employees for canteen services, emphasizing the importance of legal precedents and the specific provisions of the Cenvat Credit Rules in determining the applicability of credits in such cases.