2022 (11) TMI 1146 - AT - Service Tax

CENVAT Credit of service tax paid - legal services - Nexus with output services - Works Contract Service - reverse charge mechanism - suppression of facts or not - demand with interest and also equal amount of penalty under Rule 15(3) of Cenvat Credit Rules read with Section 78 of the Finance Act - extended period of limitation - HELD THAT - The transaction has been properly recorded in the books of accounts maintained in the normal course of business. The dispute has been raised by the Revenue on the basis of audit note, which is based on the transaction recorded in the books of accounts and vouchers maintained by the appellant. Thus, there is no case of any suppression or contumacious conduct, as the Court below itself has found that cenvat credit in respect of legal services has been rightly taken. Further taking of cenvat credit by the appellant seems to be available in view of the main clause of Rule 2(l) of Cenvat Credit Rule, which provides for taking cenvat credit for any input service used by the provider of output service in relation to rendering of output services - Admittedly, in the facts of the present case, appellant could not have rendered the output service of hotel, mandap keeper without construction of the cafe and banquet hall. Extended period of limitation - HELD THAT - The appellant has taken cenvat credit following the precedent ruling of this Tribunal and High Court referred. In this view of the matter, the extended period of limitation is not available to Revenue. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Cenvat credit on legal services
2. Cenvat credit on Works Contract Service

Analysis:

Issue 1: Cenvat credit on legal services
The appellant, a service tax assessee, availed cenvat credit for legal services not directly related to the company. The Revenue contended that the credit was wrongly taken, leading to a show cause notice for disallowance. The appellant argued that the legal dispute indirectly affected its business interests, justifying the credit. The Commissioner (Appeals) upheld the credit for legal services.

Issue 2: Cenvat credit on Works Contract Service
Regarding cenvat credit on Works Contract Service, the appellant received input services for constructing a cafe and banquet hall essential for its hotel and restaurant services. The Commissioner (Appeals) disallowed this credit citing an exclusion clause. The appellant argued that the construction directly related to its output services, supported by Tribunal rulings.

Extended period of limitation
The Revenue invoked an extended period of limitation, contending that without the audit, the discrepancies wouldn't have been noticed. The appellant challenged this, citing a Tribunal ruling emphasizing wilful suppression for invoking extended limitation. The Tribunal found no wilful suppression and allowed the appeal, setting aside the demand.

Conclusion
The Tribunal found no suppression or contumacious conduct by the appellant. It held that the cenvat credit for legal services and Works Contract Service was justifiable under the Cenvat Credit Rules. Relying on precedents and proper record-keeping, the Tribunal ruled in favor of the appellant, setting aside the impugned order and granting consequential relief.