2016 (2) TMI 474 - HC - Service Tax

Court upholds disallowance of CENVAT credit and penalties under Finance Act

Indian Visit Pvt. Ltd. Versus Commissioner of Service Tax, Delhi-I

The High Court dismissed the appeal, upholding the decisions of the Assistant Commissioner, Commissioner (Appeals), and CESTAT regarding the disallowance ... Cenvat Credit - the Commissioner (Appeals) held since the Appellants were maintaining separate accounts 'they should not have utilized the CENVAT Credit on those inputs services which were used for providing non-taxable output services.' Further there was a condition of restricting the CENVAT credit to 20% as per the provisions of Rule 6 of the CENVAT Credit Rules, 2004. - Held that:- no substantial question of law arises in the present appeal against the impugned order of the CESTAT which has concurred with the finding of both the Assistant Commissioner and the Commissioner (Appeals). As far as the penalty is concerned, the minimum penalty, as mandated by Section 76 of the Finance Act as it stood at the relevant time, has been imposed. This also does not call for any interference. - Appeal dismissed - Decided against the assessee. Issues: Condonation of delay in filing the appeal, Disallowance of CENVAT credit, Imposition of penalty, Dismissal of appeal by Commissioner (Appeals) and CESTAT, Rectification of order by CESTAT, Substantial question of law, Bifurcation of taxable and non-taxable services, Penalty under Section 76 of the Finance Act.Condonation of delay in filing the appeal:The delay in filing the appeal was condoned by the High Court based on the reasons provided in the application, and the application was disposed of accordingly.Disallowance of CENVAT credit:A show cause notice was issued to the Appellant Assessee regarding the disallowance and recovery of an amount of Central Value Added Tax (CENVAT) credit wrongly taken. The Assistant Commissioner confirmed the shortage of service tax paid and imposed a penalty for failure to comply with the CENVAT Credit Rules, 2004. The Commissioner (Appeals) dismissed the appeal on the grounds of failure to seek waiver of pre-deposit and not depositing the disputed amount. The Commissioner (Appeals) held that the Appellant should not have utilized CENVAT credit on inputs services used for providing non-taxable output services.Imposition of penalty:The Assistant Commissioner imposed a penalty for the failure to pay service tax, which was confirmed by the Commissioner (Appeals) and upheld by the CESTAT. The minimum penalty mandated by Section 76 of the Finance Act was imposed, and the High Court found no reason to interfere with this decision.Dismissal of appeal by Commissioner (Appeals) and CESTAT:The appeal by the Assessee was dismissed by the Commissioner (Appeals) and subsequently by the CESTAT. The CESTAT affirmed the penalty imposed, and an application seeking rectification of the order was also dismissed by the CESTAT.Substantial question of law and Bifurcation of taxable and non-taxable services:The High Court found that no substantial question of law arose in the appeal against the CESTAT's order. The Appellant's claim for CENVAT credit was found not to be restricted only to taxable services, as the Appellant admitted to using CENVAT credit for taxable services, including payments to a Chartered Accountant. The Court noted that the Appellant failed to demonstrate that the CENVAT credit was utilized only for taxable services, as required by the CENVAT Credit Rules, 2004.Penalty under Section 76 of the Finance Act:The minimum penalty mandated by Section 76 of the Finance Act was imposed for the non-payment of service tax. The High Court upheld the penalty, stating that there was no basis for interference in this regard.In conclusion, the High Court dismissed the appeal and the application, finding no grounds to interfere with the decisions of the Assistant Commissioner, Commissioner (Appeals), and CESTAT regarding the disallowance of CENVAT credit and the imposition of penalties.