2007 (3) TMI 99 - AT - Service Tax

Appeal success: Cenvat credit on internet services allowed; penalty set aside

UNIVERSAL CABLES LTD. Versus COMMISSIONER OF C. EX., BHOPAL

The appeal was partially allowed as the denial of Cenvat credit on Internet services was overturned due to evidence showing their utilization at the ... Cenvat credit on input services – Department contended that appellant is not eligible for Cenvat credit on the services i.e. courier service and internet service and accordingly penalty imposed on him – Held that department contention is not correct and allowed appeal partly Issues:1. Denial of Cenvat credit on Internet services and courier services.2. Challenge against denial of Cenvat credit and penalty imposition.Analysis:1. The appeal was filed against the order disallowing the benefit of Cenvat credit for services like Internet and courier services, along with a penalty. The denial was based on the grounds that courier services were used for outward transportation, and Internet services were availed at a location away from the place of manufacture. The appellant contested these denials and the penalty.2. The appellant's advocate argued that the courier services were essential for transporting finished goods to customers, making them eligible for Cenvat credit under the definition of 'Input Service.' Similarly, Internet services were crucial for communication with customers and finding solutions related to final products, justifying their eligibility for credit. On the other hand, the SDR contended that these services were not directly linked to the manufacture of final products, supporting the adjudicating authority's decision.3. The adjudicating authority found the credit for Internet services inadmissible due to the services being availed at a corporate office away from the place of manufacture. However, upon reviewing the records, it was revealed that the Internet services were utilized at the factory itself, contradicting the authority's findings. Given the importance of Internet services in modern business operations, the denial of Cenvat credit was set aside.4. Regarding the courier services, it was acknowledged that they were used for delivering finished goods to customers, akin to outward transportation. However, based on a previous tribunal decision, it was established that Cenvat credit on outward transportation charges was not permissible. Consequently, the denial of credit on courier services was upheld, in line with the division bench's ruling.5. The penalty imposed on the appellant was deemed unwarranted as the issues involved interpretation of provisions with room for differing views. Since there was no malicious intent in claiming the disputed Cenvat credit, the penalty was set aside. Ultimately, the appeal was partially allowed based on the detailed analysis of each issue presented during the proceedings.