2013 (4) TMI 219 - AT - Central Excise

Tribunal Upholds Cenvat Credits for Construction & Security Services, Disallows GTA & Telephone Services

The tribunal held that the appellant correctly availed Cenvat credit on construction services for expanding production facilities, as the new factory was ... Cenvat Credit of various input services - Penalty imposed under Rule 15(3) of Cenvat Credit Rules, 2004 - Held that:- As regards construction service, it was submitted that appellant had constructed a factory building on the other side of the road. According to the definition of ‘input service’ included service used in relation to setting up of a factory also. It was also submitted that subsequently the factory has been registered and the registration number for the existing factory on the other side of the road and for the new factory set up is one and the same. So long as the manufacturer has used the service for setting up of a factory, the credit is admissible. As regards security services, the learned DR fairly admitted that this service is one of the services recognized as common service which when used by a manufacturer in respect of exempted goods as well as the dutiable goods credit can be taken. Therefore Cenvat credit of service tax paid on security service is held to be admissible and allowed. As regards GTA service and telephone service, both sides agree that these two services are not covered by the list of common services in respect of which credit would be admissible that used for exempted as well as dutiable goods. In such a situation, assessee is required to maintain separate records for taking the credit and its utilization. Since assessee has failed to maintain separate accounts, the credit availed in respect of these two services has to be disallowed and has rightly been disallowed. Since the demand comes down subsequently to less than Rs. 35,000/-, having regard to the size of the appellant and the amount involved, I consider it appropriate that the penalty is to be set aside. While doing this I also take note of the fact that the show-cause notice has been issued within the normal limitation time. The appeal is disposed of in the above terms. Issues:1. Eligibility of Cenvat Credit on various services.2. Admissibility of Cenvat Credit on construction service.3. Admissibility of Cenvat Credit on security services.4. Disallowance of Cenvat Credit on GTA and telephone services.5. Imposition of penalty under Rule 15(3) of Cenvat Credit Rules, 2004.Analysis:1. The appellant had taken credit on various services, including security services, telephone services, GTA, construction services, and job work charges. The Cenvat Credit availed on construction service, security service, telephone service, and GTA service were found to be inadmissible. A penalty of Rs. 2,000/- was imposed under Rule 15(3) of Cenvat Credit Rules, 2004.2. Regarding the construction service, the appellant had constructed a factory building away from the existing premises to expand production facilities. The credit was denied on the grounds of the factory's location. However, it was argued that the factory was set up for expanding production, making it eligible for Cenvat credit. The registration of the new factory under the same number as the existing factory supported this claim. The tribunal held that the credit on construction service was correctly availed.3. The admissibility of Cenvat Credit on security services was discussed. The service was recognized as a common service for manufacturers dealing with exempted and dutiable goods, allowing credit to be taken. Therefore, the Cenvat credit on security services was considered admissible and allowed.4. Both parties agreed that GTA service and telephone service were not covered under common services for which credit would be admissible for exempted and dutiable goods. As the appellant failed to maintain separate records for these services, the credit availed on GTA and telephone services was rightly disallowed.5. The Commissioner imposed a penalty of Rs. 2,000/- despite confirming a demand of over Rs. 4.9 lakhs. However, as the demand was subsequently reduced to less than Rs. 35,000, considering the size of the appellant and the amount involved, the tribunal set aside the penalty. The appeal was disposed of accordingly.