2015 (7) TMI 756 - AT - Service Tax

Court dismisses revenue's appeal on Cenvat credit disallowance for Pandal/Shamiana service; emphasizes no need for one-to-one relationship

The court dismissed the revenue's appeal regarding the disallowance of Cenvat credit on grounds of invoice cancellation and service tax paid for Pandal ... Disallowance of Cenvat credit - Respondent did not clear the goods in terms of the invoice which was later on cancelled - Held that:- there is no one to one relation of input and output to be established to claim Cenvat credit. The moment input reaches the factory and those are used for manufacture, law permits the manufacturer to avail input credit. Therefore, one to one relationship is immaterial to law and disallowance of Cenvat credit of the amount of ₹ 1,07,207/- is uncalled for. Following the principle of law laid down by Hon’ble Supreme Court of India, in the case of C.C.E., Pune v. Dai Ichi Karkaria Ltd. [1999 (8) TMI 920 - SUPREME COURT OF INDIA] and by the High Court of Himachal Pradesh in the case of Ranbaxy Laboratories Ltd v. C.C.E., Chandigarh [2012 (4) TMI 369 - HIMACHAL PRADESH HIGH COURT], appeal is dismissed and respondent shall be eligible to get Cenvat credit. Service tax paid to avail Pandal and Shamiana service by respondent was to preserve raw material i.e. coal from rain - Held that:- Once there was pleading of securing of the raw material from rain by Pandal and Shamiana and such service availed was to protect coal from rain, the department should have carried out an enquiry from the provider of service as to the nature of the service provided and genuinity of the claim. But Authority proceeded by the conception that the similar services was not availed in subsequent year for no reason. Assertion of the Authority could have been proved had there been enquiry to ascertain genuinity of the claim. But nothing on record is in that regard. - in absence of justification by an independent enquiry, mere suspicion or assumption shall not come to rescue of Revenue - Decided against Revenue. Issues: Disallowance of Cenvat credit on the grounds of invoice cancellation and service tax paid for Pandal and Shamiana service.Issue 1: Disallowance of Cenvat credit due to invoice cancellationThe judgment addresses the disallowance of Cenvat credit amounting to Rs. 1,07,207 based on the cancellation of the invoice. It clarifies that there is no provision in law for a proportionate disallowance of Cenvat credit in such circumstances. The court emphasizes that a one-to-one relationship between input and output is not required to claim Cenvat credit. Once the inputs reach the factory and are used for manufacturing, the law allows the manufacturer to avail input credit. Citing legal precedents, including the case of C.C.E., Pune v. Dai Ichi Karkaria Ltd., the court dismisses the appeal and rules in favor of the respondent, stating that the disallowance of Cenvat credit in this case is unwarranted.Issue 2: Disallowance of Cenvat credit for Pandal and Shamiana serviceAnother disallowance of Cenvat credit amounting to Rs. 67,980 is discussed, relating to service tax paid for availing Pandal and Shamiana service to protect raw material, specifically coal, from rain. The court notes that the department failed to conduct an inquiry into the nature of the service provided and the genuineness of the claim. It criticizes the authority for assuming that similar services were not availed in the subsequent year without proper investigation. The court emphasizes that without justification from an independent inquiry, mere suspicion or assumption cannot support the revenue's position. Consequently, the revenue's appeal is dismissed on this count as well.In conclusion, the judgment dismisses the revenue's appeal on both counts of disallowance of Cenvat credit, highlighting the importance of following established legal principles and conducting thorough inquiries to substantiate claims and decisions.