Tribunal upholds service tax on storage charges but sets aside excess CENVAT credit utilization demand. Penalties canceled.

The tribunal upheld the demand for service tax on storage and warehousing charges, as the appellant failed to pay the due service tax on goods stored before export. However, the demand for excess CENVAT credit utilization was set aside since the appellant could use the remaining credit in subsequent years. The tribunal also dropped the demands related to the 8% value of exempted services, as the appellant had reversed the entire credit on common input services. All penalties imposed on the appellant were canceled due to a lenient view taken by the tribunal.

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Issues involved:
1. Demand of service tax on storage and warehousing charges.
2. Allegation of taking excess CENVAT credit.
3. Demand of 8% of value of exempted services.
4. Imposition of penalties under Sec.76 & 78 of the Finance Act, 1994.

Demand of service tax on storage and warehousing charges:
The appellant, a service provider registered with the Central Excise Department, was found to be not paying service tax on storage and warehousing charges collected for Soya bean meal stored before export. The department issued a show cause notice demanding an amount along with interest and penalties. The appellant argued that mere renting of premises to a sister concern cannot be considered as warehousing service and that the goods were subsequently exported, making it a cargo handling service. However, the tribunal found that charging for storage of goods belonging to another entity constitutes storage and warehousing service, and the appellant failed to pay the due service tax. The tribunal upheld the demand of service tax along with interest.

Allegation of taking excess CENVAT credit:
The appellant was accused of utilizing 100% of the CENVAT credit instead of the permissible 20% during the relevant period. The appellant contended that they were not restricted from taking credit but only from utilizing it, and the remaining credit could be used in the immediate next financial year. The tribunal agreed with the appellant, stating that the demand for excess credit utilization does not hold as they were entitled to use the credit in subsequent years. Therefore, the demand on this ground was set aside.

Demand of 8% of value of exempted services:
The department raised a demand of 8% of the value of exempted services, alleging that the appellant had availed common input services and reversed only a small portion of the credit. The appellant argued that they had reversed the entire credit on common input services. The tribunal found merit in the appellant's argument and set aside the demands related to the 8% value of exempted services, stating that once the CENVAT credit on common input services had been reversed, the demands could not be sustained.

Imposition of penalties under Sec.76 & 78 of the Finance Act, 1994:
Regarding the penalties imposed, the tribunal noted that the appellant may have been under a mistaken impression about their tax liability. Taking a lenient view, the tribunal invoked Sec.80 of the Finance Act, 1994, and set aside all penalties imposed on the appellant. The tribunal modified the impugned order, upholding the demand for service tax on storage and warehousing charges, setting aside the demand for excess CENVAT credit utilization, dropping the demands related to the 8% value of exempted services, and canceling all penalties.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD provides a comprehensive understanding of the issues involved and the tribunal's findings on each matter, preserving the legal terminology and significant phrases from the original text.

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