2016 (9) TMI 1136 - AT - Service Tax

Appellant wins on CENVAT credit, tower construction services, and 100% credit on capital goods. Denied credit on towers and shelters. No penalties imposed.

The appellant succeeded in most issues, including utilization of CENVAT credit beyond 20%, credit on services for tower construction, and availing 100% ... Cenvat credit - service tax paid on various input services and utilization thereof - Demand - utilization of CENVAT credit in excess of 20% - Held that:- as per the provisions of Rule 6(3)) of Cenvat Credit Rules, 2004, cenvat credit cannot be utilized in excess of 20% of the credit, if an assessee is providing taxable and non-taxable services. Appellant was correct in submitting that similar issue in respect of appellant is decided by this Bench as reported at [2009 (2) TMI 91 - CESTAT NEW DELHI]. Since similar issue in appellant's own case is decided in their favour following the same, we hold that revenue has no case on this issue. Demand - CENVAT credit of service tax paid on construction of tower - Held that:- on perusal of Tribunal's order , it is found that same issue was agitated before the Bench. Tribunal considering the issue from all angles held that CENVAT credit can be availed of service tax paid on services utilized for erection of towers. We do not find any reason to deviate from such a reasoned order. Accordingly, we hold that CENVAT credit availed of service tax paid on services utilized for erection of tower. Demand - availment of CENVAT credit on capital goods at one go -Held that:- it is the case of revenue that appellant cannot do so and as per rules they have availed 50% of the duty paid in first year in which CENVAT credit are received and balance 50% next year. Appellant has availed 100% credit in the second year. We find that there is no dispute that appellant is eligible to avail CENVAT credit on the capital goods and Central Excise duty is paid on capital goods; they are received by appellant and used. In our view the provisions of Rule 4(2)(a) of Cenvat Credit Rules, 2004, do no restrict availment of credit of 100% of duty paid on capital goods in the second year. The issue is now squarely covered in favour of appellant in the case of Herbicure Pvt. Ltd. [2007 (4) TMI 102 - CESTAT, KOLKATA] wherein similar issue is decided by Tribunal in favour of assessee. By respectfully following the ratio we hold that the appeal of the appellant on this point succeeds. Demand - supply of Diesel - diesel is excluded input for availing CENVAT credit - Held that:- it is claimed by the learned Chartered Accountant that they had availed credit of service tax paid on the various services which are associated with the supply and running of DG set and not availed the credit of duty paid on Diesel. This stand was taken by the appellant before adjudicating authority. It seems that the same is accepted by the adjudicating authority as there are no findings recorded on this issue. On perusal of definition of inputs and input services in Rule 2(k) and (l) of Cenvat Credit Rules, 2004, we find that CENVAT credit cannot be availed of duty paid on Diesel, but there is no bar in availing CENVAT credit of service tax paid on services associated with delivery of diesel, loading in DG set etc. Accordingly, we hold that CENVAT credit cannot be denied to appellant on this point. The appeal is allowed. Demand - liasioning charges, catering services etc. - Held that:- the stand of revenue on these two points seems to be not in consonance with the law as it is undisputed that appellant has engaged professional service for liasioning with various authorities for and in respect of the business activity and paid service tax to the Government. This issue is now settled by Hon'ble High Court of in the case of Hindustan Coca Cola Beverages Pvt. Ltd. [2010 (5) TMI 235 - CESTAT, NEW DELHI] and in respect of catering charges by the decision of this Bench in their own case in final order dated 31.03.2015 [2015 (3) TMI 1214 - CESTAT MUMBAI]. Accordingly, appeal of the appellant on these two points are allowed. Demand - Tower and Shelter - CENVAT credit of duty paid on Towers and Shelters - Held that:- the issue is no more res integra and is covered against the appellant by the judgement of the Hon'ble High Court of Bombay in the case of Bharati Airtel [2014 (9) TMI 38 - BOMBAY HIGH COURT]. Accordingly, we hold that appellant's appeal on this point fails and they are directed to pay back the amount with interest. Imposition of penalty - Held that:- since all the issues involved in this case are of interpretative nature, there is no reason to visit appellant with any penalty. - Appeal disposed of Issues Involved: Utilization of CENVAT credit in excess of 20%, CENVAT credit on services utilized in construction of towers, Availment of CENVAT credit on capital goods in excess of 50% in the same financial year, CENVAT credit on input service related to supply of diesel, CENVAT credit on liasoning charges, CENVAT credit on catering charges, CENVAT credit on towers and shelters, Time-barring, Penalty.Detailed Analysis:(a) Utilization of CENVAT Credit in Excess of 20%:The appellant contested that utilization beyond 20% of the service tax liability, as per Rule 6(3)(c) of the Cenvat Credit Rules, 2004, was only for specific months and not on a monthly basis. The Tribunal referenced a previous decision in the appellant's favor (2009 (16) STR 714), concluding that the revenue had no case on this issue.(b) CENVAT Credit on Services Utilized in Construction of Towers:The appellant argued that services such as erection and installation, used in setting up towers, were eligible for credit as there was no restriction during the disputed period (2003-04 to December 2007). The Tribunal upheld the appellant's claim, referencing a previous order (A/86785/15/SMB dated 30.04.2015) that allowed such credits.(c) Availment of CENVAT Credit on Capital Goods in Excess of 50% in the Same Financial Year:The appellant availed 100% credit in the subsequent year, which the revenue disputed. The Tribunal found no restriction in Rule 4(2)(a) of the Cenvat Credit Rules, 2004, against availing 100% credit in the second year and cited the case of Herbicure Pvt. Ltd. (2007 (216) ELT 216 (Tri. Kolkata)) to support the appellant's stance.(d) CENVAT Credit on Input Service Related to Supply of Diesel:The appellant claimed credit on services associated with the supply and operation of diesel generators, not on the diesel itself. The Tribunal agreed, stating that while credit on diesel is barred, there is no restriction on credit for services related to diesel supply and usage.(e) CENVAT Credit on Liasoning Charges and Catering Services:The Tribunal found the appellant's use of professional services for business activities and catering services to be legitimate for credit. It referenced the Hindustan Coca Cola Beverages Pvt. Ltd. case (2010 (19) STR 280 (Tri. Del.)) and a previous order in the appellant's favor for catering services.(f) CENVAT Credit on Towers and Shelters:The Tribunal ruled against the appellant, referencing the Bombay High Court's decision in Bharati Airtel (2014 (35) STR 865 (Bom)), which denied credit on towers and shelters. The appellant was directed to repay the amount with interest.(g) Time-Barring:The appellant argued that the demand for the period 2003-04 to 2006-07 was time-barred. However, the Tribunal did not record findings on this aspect, focusing instead on the merits of the case.(h) Penalty:The Tribunal found no reason to impose penalties, given the interpretative nature of the issues. It stated that the appellant had a bona fide belief in the correctness of their credit claims.Conclusion:The appeal was disposed of with detailed findings favoring the appellant on most issues, except for the credit on towers and shelters, which was denied. The Tribunal did not impose any penalties and did not address the limitation aspect due to the comprehensive findings on the merits.