2024 (12) TMI 947 - AT - Service Tax

Recovery of CENVAT Credit availed on reimbursement charges of diesel/ electricity, with interest and penalty - HELD THAT - The issue is no longer res-integra decided by the Mumbai Bench of this Tribunal in the case of M/s Idea Cellular Ltd. 2016 (9) TMI 1136 - CESTAT MUMBAI , wherein it was held that ' On perusal of definition of inputs and input services in Rule 2(k) and (1) of Cenvat Credit Rules, 2004, we find that CENVAT credit cannot be availed of duty paid on Diesel, but there is no bar in avalling CENVAT credit of service tax paid on services associated with delivery of diesel, loading in DG set etc. Accordingly, we hold that Cenvat credit cannot be denied to appellant on this point.' As the issue stands decided in favour of the appellant, there are no merits in the impugned order and the same is set aside - appeal allowed.

Summary

Issues:
1. Recovery of Cenvat credit on reimbursement charges of diesel/electricity.
2. Recovery of interest on the amount.
3. Imposition of penalty under Cenvat Credit Rules.

Detailed Analysis:
1. The appeal challenged an Order-in-Original that demanded recovery of Cenvat credit of Rs. 26,14,19,283 availed on reimbursement charges of diesel/electricity during April 2015 to March 2016. The appellant, engaged in providing Telecommunication Services, availed Cenvat credit as per Cenvat Credit Rules, 2004. Discrepancies were noted during an audit, leading to show cause notices being issued. The impugned order demanded recovery of the credit, interest, and imposed a penalty under the relevant provisions.

2. During the hearing, the appellant argued that similar issues had been decided in their favor in previous cases by the Tribunal. The Mumbai Bench's decision in the case of M/s Idea Cellular Ltd. was cited, where it was held that Cenvat credit cannot be denied on services associated with the supply and running of diesel, even though credit for duty paid on diesel itself is excluded. The Tribunal set aside a previous order confirming the demand against the appellant, following a similar reasoning in a different case.

3. The Tribunal found that the issue had already been settled in favor of the appellant based on previous decisions. Referring to the Mumbai Bench's decision and another case involving denial of Cenvat credit on diesel/electricity used as inputs, the Tribunal concluded that the impugned order lacked merit. Consequently, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant. The recovery of credit, interest, and penalty were all set aside based on the established legal principles and precedents cited.