Tribunal overturns disallowance of Cenvat Credit on property rent, reduces penalty

The Tribunal set aside the Commissioner's decision disallowing Cenvat Credit on renting immovable property, remanding the case for re-quantification of the demand with interest and penalty. The Appellant's contention that only a small portion of the property was used for depot activity was accepted, leading to a reduction in the disallowance. The appeal was disposed of with a direction to reduce the penalty to fifty percent in line with relevant legal provisions.

---

---

Issues:
Dis-allowance of Cenvat Credit on renting of immovable property.

Analysis:
In this case, the Appellant had leased a property for manufacturing and depot activities. The dispute arose regarding the disallowance of Cenvat Credit by the Commissioner (Appeals) specifically related to the renting of immovable property. The Appellant contested the disallowance of credit pertaining to the rented property while not objecting to the disallowance of credit on other input services.

A show cause notice was issued to the Appellant for recovery of a specific amount availed as Cenvat Credit. The dispute involved the proportion of the property used for manufacturing and depot activities, which was not contested by the authorities. The Appellant's contention was that only a small portion of the property was used for depot activity, making a specific amount ineligible for credit.

The Appellant presented evidence supporting their claim, including a certificate from a Chartered Accountant. The authorities did not provide a rationale for quantifying the inadmissible credit based on the ratio of sales turnover for each activity. The Commissioner accepted that only a certain amount was ineligible for credit due to the property's usage for depot activity, leading to a reduction in the disallowance.

The Tribunal found that the matter required correct quantification of the demand to be recovered from the Appellant. As a result, the impugned order was set aside, and the case was remanded back to the adjudicating authority for re-quantification of the demand with interest and penalty, in line with the observations made.

Ultimately, the appeal was disposed of with the direction for re-quantification of the demand, emphasizing the reduction of penalty to fifty percent in accordance with the relevant legal provisions applicable during the disputed period.

This detailed analysis highlights the key arguments, evidence presented, authorities' positions, and the Tribunal's decision, providing a comprehensive understanding of the judgment.

---