9911796707
TMI Blog2010 (12) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... . e. An amount of Rs. 5,25,00,000 being penalty imposed on the assessee under Rule 15(4) of CCR read with section 78 of the Finance Act, 1994 (the Act.) 2. The facts of the case as per records are as follows : a. The assessee is registered with the Department for providing taxable services falling under the categories Consulting Engineer, Maintenance or Repair Services and, Erection, Commissioning and Installation Services. During the course of verification of the records of the assessee, it was noticed that the assessee had entered into a contract with M/s. Bharathi Televentures for supply and installation of BTS, Microcell and other Microwave equipments for telecommunication network. The invoice for the supply of telecommunication equipment is issued from the Corporate Office at Gurgaon and the invoice for service portion is issued from branches. The assessee is having a branch at Hyderabad which issues bills exclusively for the taxable services provided by them. The assessee is taking the Cenvat Credit of tax paid on the input services used in the provision of taxable output services as well as the Cenvat Credit distributed by its Corporate Office. The Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services to their branch at Hyderabad. In such a scenario, the assessee is liable to utilize Cenvat Credit only to the extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output services in terms of Rule 6(3)(c) of the CCR. However the assessee has utilized the entire Cenvat Credit available with it towards the discharge of service tax liability on the taxable output services instead of availing the Cenvat Credit only to the extent of 20 per cent of the amount of service tax payable by them as stipulated in Rule 6(3)(c) of the CCR c. As per Explanation III to Sub-Rule (3) of Rule 6 of the CCR, the Cenvat Credit shall not be allowed on input and input services used exclusively for the manufacture of exempted goods or exempted services. In the instant case, the assessee is availing Cenvat Credit on the input services viz. Marine and Transit Insurance, Burglary Insurance, Insurance of Telecommunication Equipment, Consultancy Charges paid to the foreign service provider, distributed by the Corporate Office which are used exclusively in the procurement of telecommunication equipment. Since the input services are used exclusively for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Office maintained two accounts: (i) relating to tax paid on input services which are directly and exclusively used in the provision of taxable output services and (ii) another account showing service tax paid on indirect input services which are used in provision of taxable services as well as trading activity. It is claimed that at no point of time, Cenvat Credit utilized or distributed by the Corporate Office from the common input service tax account exceeded 20 per cent of the output service tax liability of the company collectively and all the branches individually. The assessee/appellant neither provided any exempted services nor is it engaged in sale of telecommunication equipment. It therefore availed and utilized 100 per cent Cenvat Credit on all input services received at its office. This position was intimated to the Department. It is submitted that the assessee did not violate provisions of Rule 6(3)(c) of CCR. The Department wrongly held that the activity of sale of telecommunication equipment constitute rendering of exempted services. This was perverse. It is submitted that the Cenvat Credit utilized by the Corporate Office and branches has not exceeded 20 per cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 66 of the Finance Act." 5. We note that in Stay Order No. 1685/2009 in the case of BHEL-GE Turbine Service (P.) Ltd. v. CCE [2010] 27 STT 214 (Bang. - CESTAT) we held that exempted services mentioned in Rule 2(e) of CCR covered only services which were notified and prima facie could not be interpreted to include the services on which no tax was levied under section 66 of the Act. The basis on which the demand is raised is that the Corporate Office and the main unit of the appellant (which is also registered as ISD) provided output services which are attributable to taxable services as well as exempted services, namely, trading activity and failed to maintain separate accounts for receipt, consumption and inventory of input services meant for use in providing taxable output services and in the provision of exempted services thereby violating provisions of Rule 6(3) of CCR and inviting restriction to utilize the credit available upto a maximum of 20 per cent of the tax on output services produced. We find that prima facie the trading activity involved does not constitute exempted services for the assessee to come within the mischief of rule 6(3)(c) of CCR. Therefore, pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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