2018 (1) TMI 56 - AT - Service Tax

Tribunal overturns decision on input services utilization, emphasizes need for proper documentation review

IFB Industries Ltd. Versus CCE, Panchkula

The Tribunal set aside the decision confirming a demand, interest, and penalty against the appellant for utilizing input services for taxable and ... Valuation - free warranty services - Held that: - the appellant have marketing division which has obtained the permission as input service distributor and they have service division, which is engaged in the repair and maintenance and after sale service on warranty and AMC basis - matter is sent back to the adjudicating authority to take into account various documentary evidences which the appellant have furnished including ledgers and returns to support their claim that the entries can be easily correlated for respective divisions - appeal allowed by way of remand. Issues:1. Utilization of input services for taxable and non-taxable services without maintaining separate records.2. Liability under Rule 6(3) of the Cenvat Credit Rules, 2004.3. Confirmation of demand, interest, and penalty.4. Examination of separate records and documentation submitted by the appellant.5. Adjudication based on documentary evidence.6. Set aside the impugned order and remand the matter for de novo adjudication.Analysis:1. The appellant was engaged in providing taxable services and utilized various input services for both taxable and non-taxable services without maintaining separate records. The Revenue contended that this action rendered the appellant liable to pay an amount equal to a percentage of the value of exempted services under Rule 6(3) of the Cenvat Credit Rules, 2004.2. A show cause notice was issued, resulting in the confirmation of a demand amount along with interest and penalty. The appellant challenged this decision through an appeal.3. Upon hearing both sides, it was observed that the appellant had separate divisions - a marketing division and a service division. The marketing division had obtained permission as an input service distributor, while the service division was engaged in repair and maintenance services. The appellant claimed that they had submitted separate records, ledgers, and returns for each division, which were not adequately examined by the adjudicating authority.4. The appellant argued that the adjudicating authority had treated the entire sale of the marketing division as exempted service without properly considering the documentation provided. The Tribunal found merit in the appellant's contention, noting that the documentary evidence submitted had not been given due weightage.5. The Tribunal decided to set aside the impugned order and remand the matter back to the adjudicating authority for de novo adjudication. They directed the adjudicating authority to consider the various documentary evidences provided by the appellant, including ledgers and returns, and to provide detailed findings on the same. The appellant was to be given a fair opportunity for a personal hearing to defend their case.6. The appeal was disposed of by way of remand, and the operative part was pronounced in the open court.