2024 (9) TMI 1084 - HC - Service Tax

Reversal of CENVAT Credit under Rule 6 of the CENVAT Credit Rules, 2004 - CENVAT Credit on Group Personal Accident Policy, Group Term Life Policy, and Group Mediclaim Policy taken for employees - penalty and interest on tax liability discharged under Reverse Charge Mechanism on legal services - HELD THAT - Insofar as the reversal of CENVAT credit in respect of non-taxable services in the State of Jammu and Kashmir is concerned, the Tribunal has firstly taken note of the conceded position of the respondent-assessee providing both taxable as well as non-taxable services. It is in the aforesaid context that it has ultimately upheld the right of the assessee for a proportionate reversal in accordance with Rule 6 (3) of the CENVAT Credit Rules, 2004. In the absence of the appellant having been able to establish any intent on the part of the respondent-assessee to evade payment of duty, there are no justification to interfere with the view ultimately expressed by the CESTAT. Appeal dismissed.

Summary

Issues:
1. Challenge to the decision of the Customs, Excise and Service Tax Appellate Tribunal by the Commissioner of Customs.
2. Questions of law proposed for consideration.
3. Abandonment of the issue regarding premium for insurance services.
4. CENVAT credit availed on various insurance policies for employees.
5. Reversal of CENVAT credit for non-taxable services in Jammu and Kashmir.
6. Imposition of penalty on tax liability discharged under Reverse Charge Mechanism on legal services.

Analysis:
1. The Commissioner of Customs challenged the decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) and proposed questions of law regarding the reversal of CENVAT credit, availing CENVAT credit on insurance policies for employees, and penalty on tax liability under Reverse Charge Mechanism on legal services.
2. The issue concerning premium for insurance services was abandoned before CESTAT, focusing on CENVAT credit availed on Group Personal Accident Policy, Group Term Life Policy, and Group Mediclaim Policy for employees, reversal of CENVAT credit for non-taxable services in Jammu and Kashmir, and penalty on tax liability under Reverse Charge Mechanism on legal services.
3. CESTAT found that the appellant was entitled to avail CENVAT credit on insurance premiums for employees based on the nexus with the business, citing relevant case laws and decisions by the Larger Bench, emphasizing the wide import of the definition of "input service."
4. The Tribunal upheld the right of the assessee to proportionately reverse CENVAT credit for non-taxable services in Jammu and Kashmir as per Rule 6(3) of the CENVAT Credit Rules, 2004.
5. The Tribunal clarified that the appellant had duly determined and deposited the CENVAT credit, and the issue of filing the declaration was considered directory, not mandatory, citing precedents and decisions supporting the appellant's actions.
6. Regarding the imposition of a penalty on tax liability discharged under Reverse Charge Mechanism on legal services, the Tribunal found no evidence of intent to evade payment of duty by the appellant, leading to the dismissal of the appeal and refusal to impose a penalty.

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