Cenvat credit denied for services not rendered under the assessee's contract, while penalty failed absent fraud or suppression.

Cenvat credit was held inadmissible where the disputed clearing and forwarding and inland haulage services were not contracted for or rendered to the assessee under its own supply arrangement, making the credit inconsistent with the Cenvat framework. Penalty under Rule 15(2) was set aside because the credit dispute arose from interpretation of eligibility based on valid invoices, and the record did not show fraud, collusion, or suppression with intent to evade revenue. The appeal therefore succeeded only on the penalty issue, while the credit denial was upheld.

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Issues: (i) Whether Cenvat credit was admissible on service tax paid on clearing and forwarding and inland haulage services shown in invoices issued in relation to goods supplied to the assessee. (ii) Whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 was sustainable.

Issue (i): Whether Cenvat credit was admissible on service tax paid on clearing and forwarding and inland haulage services shown in invoices issued in relation to goods supplied to the assessee.

Analysis: The credit was taken on services paid by the supplier's Mumbai office, while the assessee's agreement with the supplier was only for supply of goods. The assessee had not contracted for the disputed taxable services, and those services were not provided to the assessee under the arrangement on record. On that basis, the credit taken on the strength of the supplier's invoices was held to be inconsistent with the Cenvat framework.

Conclusion: The denial of Cenvat credit was upheld and the issue was decided against the assessee.

Issue (ii): Whether penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 was sustainable.

Analysis: The credit was taken on the basis of valid invoices and the dispute turned on interpretation of eligibility to credit. The record did not support fraud, collusion, or suppression of facts with intent to evade revenue. In these circumstances, invocation of penal consequences was found unwarranted.

Conclusion: Penalty under Rule 15(2) was set aside and the issue was decided in favour of the assessee.

Final Conclusion: The assessee did not succeed on the credit entitlement question, but succeeded in getting the penalty annulled, so the appeal was allowed only to the extent of penalty.

Ratio Decidendi: Cenvat credit is not available where the disputed services were not rendered to the assessee under its own contractual arrangement, and penalty cannot be sustained in the absence of fraud, collusion, or suppression when the dispute is one of statutory interpretation.

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