2014 (2) TMI 1000 - AT - Service Tax

Appellate tribunal overturns demand for irregular CENVAT credit, criticizes adjudicating authority.

The appellate tribunal set aside the order confirming the demand for recovery of irregular CENVAT credit and penalties against the appellant, criticizing ... Cenvat Credit - Nexus between input and output service - Held that:- For rendering services, the appellant has to hire premises, recruit employees, use information technology software, engage management consultant, manage, maintain or repair both movable and immovable properties, use telecommunication services for communication purposes and so on. - The definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 is worded in a broad manner so as to bring within its ambit services availed by a provider of taxable service, whether directly or indirectly, and also enumerates some of the services which fall within the purview of the input service. Appellant has, clearly and in detail, explained the nexus between the input service on which credit was taken and the output service provided. Instead of examining the claim of the appellant and rebuting the same, if required, the adjudicating authority has dealt with the issue in a cavalier and irresponsible way. - matter remanded back for reexamination of the facts - Decided in favor of assessee. Issues:Recovery of irregular CENVAT credit availed by the appellant, imposition of penalties, nexus between input services and output services, sustainability of the demand confirmed against the appellant.Analysis:The appellant, a service provider registered under various categories, was issued a show cause notice proposing recovery of irregular CENVAT credit. The notice alleged a lack of nexus between the input services and output services provided by the appellant. The appellant contested the notice, explaining the nexus between the services, but the order-in-original confirmed the demand for recovery and imposed penalties. The appellant appealed, arguing that the demand was unsustainable as the adjudicating authority did not consider their explanations. The appellate tribunal observed that the issue was narrow and decided to consider the appeal without pre-deposit.The appellant detailed the nexus between the input services availed and the output services provided, including hiring premises, recruiting employees, using software, engaging consultants, and utilizing telecommunication services. The appellant's contentions and reliance on case laws were not examined by the adjudicating authority, who dismissed the contentions without proper examination. The tribunal noted that the definition of input service under the CENVAT Credit Rules is broad and covers services directly or indirectly related to taxable services. The adjudicating authority's handling of the issue was criticized for not following proper adjudication procedures.Consequently, the tribunal set aside the impugned order as unsustainable in law and remitted the matter back to the adjudicating authority for a fresh consideration of the issues involved. The adjudicating authority was directed to examine the contentions raised by the appellant and pass a speaking order in accordance with the law. The appeal was allowed by way of remand, and the stay petition was disposed of. A copy of the order was to be sent to the jurisdictional Chief Commissioner of Central Excise for necessary action.