Tribunal allows credit on various services pre-2011, disallows car rentals post-2011. Penalty set aside.
The Tribunal allowed credit on canteen, air ticketing, mobile phones, bus transport, and car rental services availed before April 1, 2011. Credit for car rentals post-April 1, 2011, was disallowed. The penalty was set aside, modifying the original order to allow credit on all services except car rentals post-April 1, 2011. The appeal was partly allowed in favor of the appellant.
Issues: Disallowance of credit on input services
Analysis:
1. The appellant, engaged in manufacturing engine valves, availed CENVAT credit on duty paid inputs, capital goods, and service tax on input services. A show cause notice was issued due to irregular credit availed on input services from March 2011 to December 2011, leading to confirmation of demand, interest, and penalty by the original authority. The Commissioner (Appeals) upheld the disallowance but reduced the penalty.
2. The appellant's counsel explained the disputed services and amounts involved, including canteen services, car rentals, air ticketing, mobile phones, and bus transport. The counsel argued that credit on certain services availed before April 1, 2011, should be allowed based on the definition of input service at that time. The appellant was found eligible for credit on canteen, air ticketing, and bus transport services fully availed before April 1, 2011. However, credit for car rentals post-April 1, 2011, was disallowed, while credit for car rentals pre-April 1, 2011, and mobile phone services was deemed eligible.
3. The Departmental representative contended that the appellant failed to establish the nexus of services with manufactured goods and lacked evidence showing charges for canteen and bus transport services contributed to production costs. The Tribunal noted that the appellant paid for these services, had invoices in their name, and paid service tax, rejecting the Department's argument of non-incurrence of charges without evidence to the contrary.
4. After considering submissions, the Tribunal allowed credit on canteen, air ticketing, mobile phones, bus transport, and car rental services availed before April 1, 2011. Credit for car rentals post-April 1, 2011, was disallowed as per the revised definition of input services. The penalty was set aside, modifying the original order to allow credit on all services except car rentals post-April 1, 2011. The appeal was partly allowed in favor of the appellant.
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