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2024 (9) TMI 319 - AT - Service TaxCENVAT Credit - input services - mobilization advance availed and debited w.e.f. July, 2012 of Rs. 91,01,452/-, paid during the year 2010-11 - interest - penalty - extended period of limitation - HELD THAT - From the statutory provisions, it is evident that the scope of definition of input service as enumerated under Rule 2(l) of Cenvat Credit Rules, 2004, does not cover the services specified under Commercial or Industrial Construction services, construction of Complex services and Works Contract services so far as the same are used for construction of a building or a civil structure or a part thereof for the period upto 30.06.2012. Further, it is noted that from 01.07.2012 onwards, the scope of input service definition excludes the service portion in the execution of a works contract and construction services, including service listed under clause (b) of section 66E of the Finance Act in so far as they are used for construction or execution of works contract of a building or a civil structure or a part thereof. In view of the statutory provisions, it is opined that the Commissioner was correct in holding that any service tax paid by the service providers on such mobilization advance received towards rendition of such construction services, would not qualify to be eligible as Cenvat credit, as the services so received are not eligible input services in terms of the provisions of Rule 2(l) of Cenvat Credit Rules, 2004. The question of taxability on mobilization advances has been well settled and in the case of M/S GJF CONSTRUCTION CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, HYDERABAD 2018 (8) TMI 323 - CESTAT HYDERABAD and in the case of THERMAX INSTRUMENTATION LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I 2015 (12) TMI 1222 - CESTAT MUMBAI , the Tribunal held that mobilization advance received by the assessee is not chargeable to service tax, if it is in the nature of an advance. In view of the same, the appellant was not entitled to take credit of service tax paid on such mobilisation advances. Consequently, the demand confirmed in the impugned order upheld. Confirmation of interest under Rule 14 of the Cenvat Credit Rules, 2004 - HELD THAT - There was no service tax liability on such mobilisation advances. Therefore, the credit taken on such tax paid was not admissible - The word taken as used in Rule 14 is considered on a different footing from the word availed . In view of the submissions made that the appellant had balance of Cenvat Credit higher than Rs. 91,01,452/-, it is held that no interest is liable to be paid. Extended period of limitation - Penalty u/s 77 and 78 of the Finance Act, 1994 - HELD THAT - The appellant was registered with the Revenue department and was paying Service Tax on various outputs services. The appellant was filing returns regularly. It is also on record that the appellant had cooperated with the Department and had submitted all information/documents were furnished during audit - the Courts have consistently held that in such a situation, the facts are deemed to be in the knowledge of the Department, and the intent to evade has to be positive act to be established by the department - there is no justification for invoking the extended period to impose penalty under Section 78. There is also no justification for imposing penalty under section 77 of the Finance Act. Appeal allowed in part.
Issues Involved:
1. Power to conduct audit under Rule 5A of Service Tax Rules, 1994. 2. Eligibility of CENVAT credit on mobilization advances. 3. Liability to pay interest under Rule 14 of CENVAT Credit Rules, 2004. 4. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. Detailed Analysis: 1. Power to Conduct Audit Under Rule 5A of Service Tax Rules, 1994 The appellant contended that there is no power to conduct audits under Rule 5A of Service Tax Rules, 1994, and Chapter V of the Finance Act, 1994 does not grant audit powers to officers authorized by the Comptroller and Auditor General (CAG). The Central Government Circular No. 181/7/2014-ST clarified that Rule 5A(2) allows scrutiny of records by officers authorized by the Commissioner or the Audit Party deputed by the Commissioner or CAG, constituting an audit by departmental officers. The Hon'ble Apex Court in Union of India And Ors Vs. M/s Travelite (India) [2014 (12) TMI 1099 - SUPREME COURT] granted a stay on the Delhi High Court judgment, thus supporting the statutory backing for such audits. Consequently, the Tribunal found no merit in the appellant's contention. 2. Eligibility of CENVAT Credit on Mobilization Advances The appellant argued that they availed 'works contract services' for constructing a multi-storeyed housing complex and paid mobilization advances in 2010-11, adjusting these against bills from July 2012. They claimed CENVAT credit on these services as input services under Rule 2(l) of CENVAT Credit Rules, 2004. The Tribunal noted that the definition of "input service" excludes services related to construction of buildings or civil structures for the period up to 30.06.2012 and from 01.07.2012 onwards. The Tribunal upheld the Commissioner's view that service tax paid on mobilization advances does not qualify as eligible CENVAT credit. The Tribunal referenced the cases of M/s GJF Construction Company Limited vs. CCE, Hyderabad and Thermax Instrumental Limited vs. CCE, which held that mobilization advances are not chargeable to service tax if they are in the nature of an advance. 3. Liability to Pay Interest Under Rule 14 of CENVAT Credit Rules, 2004 The appellant claimed that the CENVAT credit balance was always higher than Rs. 91,01,452/- and thus, the credit was availed but not utilized. Rule 14 of CENVAT Credit Rules, 2004, provides for recovery of CENVAT credit taken and utilized wrongly. The Tribunal referenced the Hon'ble Karnataka High Court's decision in CCE vs. Bill Forge Private Limited [2012 (26) STR 204 (Kar)], which held that interest is not payable if the credit was merely availed but not utilized. Consequently, the Tribunal held that no interest is liable to be paid by the appellant. 4. Imposition of Penalties Under Sections 77 and 78 of the Finance Act, 1994 The Tribunal addressed the imposition of penalties, noting that the appellant was registered, paying service tax, and filing returns regularly. The Tribunal emphasized that the intent to evade tax must be a positive act established by the department. The Tribunal referenced the case of Shriram Chits Pvt Ltd vs Commissioner of C.Ex & Cus & ST, Hyderabad [2023(69) GSTL 397(Tri.-Hyd)], which held that suppression cannot be established where material facts were within the knowledge of the Revenue. The Tribunal also cited Amway India Enterprises Pvt Ltd., vs Commissioner of C.Ex, New Delhi [2017(3) GSTL 69(Tri.Del)], which held that extended periods for penalties cannot be invoked if suppression is not established. Thus, the Tribunal found no justification for invoking the extended period or imposing penalties under Sections 77 and 78. Conclusion: The Tribunal modified the impugned order, upholding the demand of Rs. 91,01,452/- but setting aside the interest and penalties imposed under Sections 77 and 78. The appeal was partially allowed to the extent indicated above.
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