2023 (2) TMI 607 - AT - Service Tax

Disllowance of CENVAT Credit - duty paying documents - invoices issued to the offices of the appellant situated in other cities, which are unregistered - corelation of the input consultancy engineering service received by the appellant with the output consultancy service rendered to others - HELD THAT - Admittedly, appellant have provided taxable output service of engineering consultancy service to other metro projects located in other cities like Hyderabad, Chennai, Pune, Kolkata etc. For providing this service, appellant have also set up offices in those cities. Rule 2(l) of CCR provides input service means any service used by provider of output service for providing an output service. This rule further provides that such input service may have been used by the manufacturer/service provider either directly or indirectly. Thus, one to one co-relation is not required for taking Cenvat credit under Rule 3 of CCR. Once credit have been rightly taken, there is no restriction in use of such credit for payment of either central excise duty or service tax or any other specified tax liability. Further, Rule 6(5) of CCR provides that the provisions of Rule 6(1), (2) and (3) are not applicable, where input service received is used both for providing taxable and tax free output service. Admittedly, in the facts of the present case, appellant have utilised the input consultancy engineering service both for providing tax free output service of passenger transport and taxable output service of consultancy engineering service. Accordingly, the demand of disallowance of Cenvat credit of Rs. 6,17,84,781/- is set aside. Disallowance of Cenvat credit with regard to input service received at the unregistered offices of the appellant located in other cities like Hyderabad, Chennai, Pune etc. - HELD THAT - It is admitted fact that such offices were opened by the appellant for providing output taxable service of engineering consultancy service. Further, Admittedly, appellant have accounted for the receipt of output taxable service provided from those offices which have been accounted for at the Delhi office and subjected to service tax. Further, condition of being registered is not essential for taking Cenvat credit, as have been held by Hon ble Karnatka High Court in mPortal India Wireless Solutions Pvt Ltd. vs. Commissioner of Service Tax, Bangalore 2011 (9) TMI 450 - KARNATAKA HIGH COURT - Demand set aside. As the appeals are allowed on merits, in favour of the appellant-assessee, the penalty imposed under Section 78 r/w Rule 15 of CCR set aside. Appeal allowed.

Summary

Issues Involved:
1. Wrongful availment of Cenvat credit on input services.
2. Wrongful availment of Cenvat credit based on invoices addressed to non-registered offices.
3. Service of the Show Cause Notice beyond the limitation period.
4. Imposition of penalty under Section 78 and Rule 15 of CCR.

Issue-wise Detailed Analysis:

1. Wrongful Availment of Cenvat Credit on Input Services:
The appellant, Delhi Metro Rail Corporation (DMRC), was found to have availed Cenvat credit of Rs. 6,17,84,781/- for consulting engineering services used during the construction of Delhi Metro, which was deemed ineligible as the services were used for exempt passenger transport services. The appellant argued that the consultancy services provided valuable knowledge for offering consulting services to other metro projects, which are taxable. The Tribunal found that the input services were indeed used for both exempt and taxable services, thus satisfying Rule 6(5) of the CCR. Consequently, the demand for disallowance of Cenvat credit of Rs. 6,17,84,781/- was set aside.

2. Wrongful Availment of Cenvat Credit Based on Invoices Addressed to Non-Registered Offices:
The appellant was also found to have availed Cenvat credit of Rs. 5,22,936/- based on invoices addressed to its offices in other cities that were not registered. The Tribunal noted that these offices were established to provide taxable consulting engineering services and that registration is not a precondition for availing Cenvat credit. The Tribunal relied on precedents, including the Karnataka High Court ruling in mPortal India Wireless Solutions Pvt Ltd., to hold that the credit was rightly availed. Thus, the disallowance of Cenvat credit of Rs. 5,22,936/- was set aside.

3. Service of the Show Cause Notice Beyond the Limitation Period:
The appellant contended that the Show Cause Notice (SCN) dated 19.10.2010 was received only on 22.09.2015, beyond the five-year limitation period. The Tribunal noted that the department claimed the SCN was dispatched via Speed Post, which is a valid means of service under Section 37C of the Central Excise Act. However, there was no proof of delivery provided by the department. Given the appeal was allowed on merits, the Tribunal left the limitation issue open.

4. Imposition of Penalty Under Section 78 and Rule 15 of CCR:
Given the Tribunal's decision to allow the appeal on merits, the penalty imposed under Section 78 and Rule 15 of CCR was set aside. The Tribunal concluded that since the appellant had correctly availed the Cenvat credit, there was no basis for the penalties.

Conclusion:
The Tribunal allowed the appeal in favor of the appellant, DMRC, setting aside the demands for disallowance of Cenvat credit and the penalties imposed. The judgment emphasized that the input services were used for both exempt and taxable services, and registration of premises is not a precondition for availing Cenvat credit. The issue of the limitation period for the SCN was left open due to the appeal being allowed on merits.