2016 (1) TMI 24 - AT - Service Tax

Appeal dismissed on Cenvat Credit admissibility, upheld on extended period for duty demand & penalty

The appeal was dismissed regarding the admissibility of Cenvat Credit on capital goods and services in Jammu & Kashmir. However, the appeal was ... Cenvat credit on capital goods installed in a territory where service tax provisions do not apply - Cenvat credit in respect of input services availed in a non-applicable State (Jammu & Kashmir) - Properness of documents for availing Cenvat credit under Rule 9 and Rule 4A(1) of Service Tax Rules - Invocation of extended period of limitation and imposition of penalty for suppression or willful mis statementCenvat credit on capital goods installed in a territory where service tax provisions do not apply - Cenvat credit taken on capital goods installed in Jammu & Kashmir is inadmissible and correctly denied. - HELD THAT: - Appellant's contention that capital goods in Jammu & Kashmir were used for taxable roaming services provided from Bhubaneswar was rejected. Centralized registration does not convert separate branch offices into a single service provider or make services provided from a non taxable territory taxable. Section 64(1) (exclusion of applicability of service tax provisions to Jammu & Kashmir) and the scheme permitting centralized registration for accounting do not permit credit where the branch in Jammu & Kashmir did not discharge service tax. The adjudicating authority's findings that capital goods installed in Jammu & Kashmir are ineligible for credit are logical and upheld. [Paras 5]Appeal on this issue dismissed; Cenvat credit on capital goods installed in Jammu & Kashmir correctly denied.Cenvat credit in respect of input services availed in a non-applicable State (Jammu & Kashmir) - Cenvat credit on services availed in Jammu & Kashmir is not admissible under the Cenvat Credit Rules. - HELD THAT: - Rule 1(2) (proviso) to the Cenvat Credit Rules excludes the applicability of the rules relating to availment and utilization of credit of service tax in the State of Jammu & Kashmir. Therefore credit claimed in respect of services availed in Jammu & Kashmir is not governed by CCR and has been correctly denied by the adjudicating authority. [Paras 6]Credit in respect of services availed in Jammu & Kashmir denied; appeal on this point dismissed.Properness of documents for availing Cenvat credit under Rule 9 and Rule 4A(1) of Service Tax Rules - Cenvat credit of Rs. 72,66,850/- taken on the documents challenged by Revenue is admissible. - HELD THAT: - A document containing the particulars prescribed in Rule 4A(1) of the Service Tax Rules may be treated as an invoice/bill/challan for purposes of availing Cenvat credit. Minor procedural irregularities do not warrant denial of credit where the requisite details are present and utilization in taxable output services is established. Reliance on precedents where debit notes or other documents meeting Rule 4A(1) particulars were held proper supports allowing the claimed credit. [Paras 7]Appeal allowed to the extent of Rs. 72,66,850/-; credit on the challenged documents held admissible.Invocation of extended period of limitation and imposition of penalty for suppression or willful mis statement - Extended period of limitation was rightly invoked and penalty equivalent to the inadmissible credit was justified. - HELD THAT: - Under Rule 9(6) the burden to prove admissibility of Cenvat credit lies on the service provider. The appellant included Jammu & Kashmir premises in centralized registration despite no taxable services being provided there and did not disclose the credit in statutory returns; these facts were held to constitute suppression/mis statement and willful contravention. Given the factual matrix and the appellant's standing, the Tribunal concurred with the adjudicating authority that proviso to Section 73(1) (extended period) applied and penalty under the relevant provisions was properly imposed. The plea of bona fide belief and invocation of Section 80 was rejected on the facts. [Paras 8]Extended period and penalty upheld; no relief under Section 80 granted.Final Conclusion: Appeal dismissed insofar as Cenvat credit on capital goods and on services availed in Jammu & Kashmir (and the invocation of extended period and penalty) is concerned; appeal allowed only to the limited extent that Cenvat credit of Rs. 72,66,850/- claimed on documents meeting Rule 4A(1) particulars is held admissible. Issues Involved:1. Admissibility of Cenvat Credit on capital goods installed in Jammu & Kashmir.2. Admissibility of Cenvat Credit on services availed in Jammu & Kashmir.3. Eligibility of Cenvat Credit of Rs. 72,66,850/- availed on documents deemed improper by Revenue.4. Invocation of the extended period for demanding duty and imposing penalty.Issue-wise Detailed Analysis:1. Admissibility of Cenvat Credit on Capital Goods Installed in Jammu & Kashmir:The appellant argued that the capital goods installed in Jammu & Kashmir were used for providing taxable roaming services from Bhubaneswar, thus not violating Rule 6(4) of the Cenvat Credit Rules, 2004 (CCR). The Revenue contended that no taxable service was provided in Jammu & Kashmir, and centralized registration was merely for ease of accounting and service tax payment, not altering the service provider's location. The tribunal observed that centralized registration did not mean services were provided from Bhubaneswar and that the branch office in Jammu & Kashmir was not required to be included in the centralized registration as no taxable service was provided there. Thus, the capital goods installed in Jammu & Kashmir were ineligible for Cenvat Credit, upholding the Adjudicating authority's decision.2. Admissibility of Cenvat Credit on Services Availed in Jammu & Kashmir:The tribunal referred to Rule 1 of the CCR, which states that the rules do not apply to the state of Jammu & Kashmir. Therefore, the Cenvat Credit taken for services availed in Jammu & Kashmir was correctly denied, supporting the Adjudicating authority's decision.3. Eligibility of Cenvat Credit of Rs. 72,66,850/- on Improper Documents:The appellant argued that the documents contained all requisite particulars as per Rule 4A of the Service Tax Rules, 1994, and cited several case laws supporting their claim. The tribunal noted that if the details prescribed in Rule 4A(1) are available in a document, it can be considered proper for availing Cenvat Credit. Minor procedural irregularities should not deny Cenvat Credit if the utilization of taxable services is established. Thus, the tribunal held that the Cenvat Credit of Rs. 72,66,850/- was correctly availed by the appellant, allowing the appeal to this extent.4. Invocation of Extended Period and Imposition of Penalty:The Adjudicating authority found that the appellant had not disclosed the availed credit in Jammu & Kashmir, indicating willful suppression of facts. The appellant argued that there was no willful suppression or misstatement, citing case laws suggesting that penalties should not be imposed for bona fide beliefs. The tribunal agreed with the Adjudicating authority, noting that the appellant, being a corporate entity, should be well aware of the law. The inclusion of the Jammu & Kashmir premises in the centralized registration was a mis-statement, and no service tax credit could be taken for non-taxable services in Jammu & Kashmir. The tribunal upheld the extended period's applicability and the penalty's imposition, rejecting the appellant's plea for relief under Section 80 of the Finance Act, 1994.Conclusion:The appeal was dismissed regarding the admissibility of Cenvat Credit on capital goods and services in Jammu & Kashmir. However, the appeal was allowed concerning the eligibility of Cenvat Credit of Rs. 72,66,850/- availed on documents.