Tribunal favors appellant in service tax case, rules transaction as sale, disallows excess credit

The Tribunal ruled in favor of the appellant in a case concerning the demand of service tax under 'Business Auxiliary Service' and the admissibility of Cenvat credit. The Tribunal held that the transaction was a sale, not subject to service tax, and disallowed the excess Cenvat credit availed. Additionally, the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004 was set aside as the appellant had no intention to evade service tax. The judgment provided relief to the appellant on all counts, clarifying the nature of the transaction and the eligibility of Cenvat credit.

---

---

Issues:
1. Demand of service tax under 'Business Auxiliary Service'
2. Admissibility of Cenvat credit
3. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004

Analysis:
1. The appeal was against an Order-in-Original dated 03/11/2014, where the revenue demanded service tax of Rs. 4,07,221 under 'Business Auxiliary Service' based on discount received by the appellant for selling Recharge Coupon Vouchers (RCVs). The appellant argued that the transaction was a sale and not covered by service tax. The Tribunal agreed, stating the difference between purchase and sale price was profit, not commission, and not subject to service tax. The demand was dropped as it was not a case of double taxation, but a pure sale transaction not attracting service tax.

2. The revenue disallowed Cenvat credit of Rs. 75,28,164 availed by the appellant, citing ineligibility under Rule 4A of Service Tax Rules, 1994 read with Rule 9 of Cenvat Credit Rules, 2004. The appellant had debited Rs. 4,07,221 from the availed credit, indicating they were not providing any output service and thus not eligible for the credit. The Tribunal agreed, disallowing the difference between the availed credit and debited amount. The penalty imposed under Sub-rule 3 of Rule 15 of Cenvat Credit Rules, 2004 was set aside as the appellant had no intention to evade service tax, making the penalty provision inapplicable.

3. The Tribunal modified the impugned order, allowing the appeal on the grounds that the transaction was a sale not subject to service tax, disallowing the excess Cenvat credit availed, and setting aside the penalty imposed under Rule 15 of Cenvat Credit Rules, 2004. The judgment clarified the nature of the transaction, the eligibility of Cenvat credit, and the applicability of penalty provisions, providing relief to the appellant on all counts.

---