2015 (1) TMI 1199 - AT - Service Tax

Tribunal decision on Cenvat credit and penalties for service tax registration and charges

M/s. JP. Kenny Ltd. Versus CCE. & CST. - Delhi

The Tribunal ruled in favor of the appellant regarding availing Cenvat Credit on invoices received before Service Tax registration based on a High Court ... CENVAT Credit - availment of the Cenvat Credit on the invoices received prior to service tax registration - Credit availed on housekeeping and hotel services charges paid - Revenue is of the view that the appellant is not entitled to take Cenvat Credit on service received prior to service Tax registration and the Housekeeping and hotel services charges are not related to their business of manufacturing as this services have been availed outside the factory premises and in residential colony - Invocation of extended period of limitation - Held that:- Following decision of MPortal India Wireless Solutions Pvt. Ltd Vs. CST reported in [2011 (9) TMI 450 - KARNATAKA HIGH COURT] - appellant is entitled to take Cenvat Credit on the invoices received prior to Service tax registration. For availment of Cenvat Credit for housekeeping services and hotel service charges which has been availed by the appellant in residential colony or for individuals. Therefore, I hold that Cenvat Credit on these services is not available to the appellant. Further, I find that during the course of the audit it was pointed out that appellant has taken inadmissible Cenvat credit and appellant has not paid inadmissible Cenvat credit. In these circumstances, revenue has rightly invoked the extended period of limitation. In these circumstances, I confirm the demand of ₹ 47,182/- to be paid by the appellant along with interest. With regard the penalty as the services is new and appellant has taken the Cenvat Credit on House keeping services which may be utilized for the business purposes of the appellant. Therefore, on that part of the input services credit the penalty is not imposable. But for the hotel services availed by the appellant, the penalty is confirmed - Decided partly in favour of assessee. Issues:- Denial of input service credit- Availment of Cenvat Credit on invoices received prior to Service Tax registration- Housekeeping and hotel services charges eligibility for Cenvat Credit- Invocation of extended period of limitation- Penalties imposed under the Finance ActDenial of Input Service Credit:The appellant appealed against the denial of input service credit amounting to Rs. 6,95,390. The appellant had availed Cenvat Credit on invoices received before their Service Tax registration and on housekeeping and hotel services charges. The Revenue contended that the appellant was not entitled to credit for services received before registration and that the housekeeping and hotel services charges were not related to their manufacturing business as they were availed outside the factory premises and in a residential colony. The matter was adjudicated, and the demands were denied along with interest and penalties under the Finance Act.Availment of Cenvat Credit on Invoices Received Prior to Service Tax Registration:The appellant argued that the Cenvat Credit could not be denied for invoices received before the Service Tax registration, citing the decision of the Hon'ble High Court of Karnataka in a specific case. The appellant also referred to a Tribunal decision supporting their claim. The appellant contended that since the facts of availing Cenvat Credit were known to the Revenue during an audit in July 2008, the demands were not sustainable due to the extended period of limitation. The appellant requested the impugned order to be set aside.Housekeeping and Hotel Services Charges Eligibility for Cenvat Credit:Regarding the housekeeping charges, the appellant relied on a Tribunal decision to support their claim for Cenvat Credit. However, the appellant conceded that they were not entitled to credit for hotel charges. The Revenue argued that prior to the Service Tax registration, the appellant could not claim Cenvat Credit. The Revenue also contended that since the housekeeping and hotel services were availed in a residential colony, the appellant was not eligible for the credit. The Revenue justified the invocation of the extended period of limitation based on the audit findings.Invocation of Extended Period of Limitation:The Tribunal examined the issue of availing Cenvat Credit on invoices received before Service Tax registration and referred to the decision of the Hon'ble High Court of Karnataka. The Tribunal held that the appellant was entitled to take Cenvat Credit on such invoices based on the High Court's decision, which prevailed over the Tribunal's decision. However, for housekeeping and hotel services charges availed in a residential colony, the Tribunal ruled that the appellant was not eligible for Cenvat Credit. The Tribunal confirmed the demand for Rs. 47,182 along with interest due to the appellant's failure to pay inadmissible Cenvat credit, justifying the invocation of the extended period of limitation.Penalties Imposed Under the Finance Act:Regarding penalties, the Tribunal found that for housekeeping services, which could be utilized for the appellant's business purposes, no penalty was imposed. However, for hotel services, the penalty was confirmed. The appeal was disposed of with the confirmation of penalties and demands as discussed above.