Tribunal allows input credit on LPG cylinders, removes penalty on works contract services

The Tribunal dismissed the department's appeal regarding irregular availment of credit on inputs and input services, allowing the input credit availed on LPG cylinders. The Tribunal set aside the penalty imposed on the appellant for availing credit on works contract services, finding it harsh considering the timing of service receipt and invoice issuance. The confirmation of demand and interest was upheld, but the penalty was removed. The appeal filed by the assessee was allowed with consequential reliefs.

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Issues:
1. Irregular availment of credit on inputs
2. Admissibility of CENVAT Credit on input services
3. Imposition of penalty for availing credit on works contract services

Analysis:

Issue 1: Irregular availment of credit on inputs
The appellant was issued a show cause notice for irregular availment of credit amounting to Rs. 2,89,747 on LPG cylinders used in forklifts and also for availing CENVAT Credit on various input services, including works contract services. The original authority confirmed the demand, disallowing the credit on both inputs and input services. However, the Commissioner (Appeals) allowed the input credit availed on LPG cylinders, leading to the department filing an appeal against this decision. The Tribunal, considering a previous Final Order, held in favor of the assessee, dismissing the department's appeal.

Issue 2: Admissibility of CENVAT Credit on input services
The Commissioner (Appeals) observed that the appellant was not eligible for credit on service tax paid for input services/works contract services and confirmed the demand along with interest and penalty. The appellant challenged this decision, arguing that the works contract services were received before 01.04.2011, even though the invoices were issued after that date. The Tribunal noted that the services were received for modernization and renovation of the factory, which were eligible input services even post 01.04.2011. Considering the circumstances, the Tribunal set aside the penalty imposed without disturbing the confirmation of demand or interest, allowing the appeal filed by the assessee.

Issue 3: Imposition of penalty for availing credit on works contract services
The appellant did not contest the confirmation of demand and interest in respect of works contract services but challenged the imposition of penalty. The department argued that since the invoices related to the input services were dated after 01.04.2011, the Commissioner (Appeals) rightly disallowed the credit and imposed a penalty. However, the Tribunal found that the imposition of penalty was harsh, considering that the services were received before 31.03.2011 and the invoices were issued immediately after the amendment. Therefore, the penalty was set aside while confirming the demand and interest, allowing the appeal filed by the assessee.

In conclusion, the appeal filed by the department was dismissed, while the appeal filed by the assessee was allowed with consequential reliefs.

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