2019 (10) TMI 587 - AT - Service Tax

Tribunal rules in favor of Appellant: Cenvat Credit allowed, service tax demands rejected

The Tribunal ruled in favor of the Appellant on all issues, allowing Cenvat Credit on various input services, excluding the value of spare ... CENVAT Credit - input services - Repair & Maintenance Service of Audio Systems - The credit availed on the pollution equipment procured from M/s AVL India Pvt. Ltd. - SMS Services Campaign - Courier Agency Services - Mobile Phone Services - Security Services, Chartered Accountant Services, etc. - Consultancy Services - Advertising & Event Management Services - Manpower Recruitment Service, Test Inspection & Certification Service, Architect Service, Insurance Service and other Repair & Maintenance Services. Repair and Maintenance of Audio System - HELD THAT:- The Appellant is entitled to avail Cenvat Credit of service tax paid on repair and maintenance service - reliance placed in the case of M/S. UTTAM TOYOTA VERSUS CCE & ST, GHAZIABAD [2019 (2) TMI 573 - CESTAT ALLAHABAD]. Credit Availed On The Pollution Equipment Procured From M/s AVL India Pvt. Ltd. - only reason why this Cenvat Credit been denied to the Appellant is that it was not contested in reply to the show cause notice and the invoices had also not been submitted - HELD THAT:- This is apparently incorrect because not only had the Appellant contested this issue but had also enclosed the invoices. The procurement of the pollution equipment purchased by the Appellant is essential for provision of output service and therefore, the Appellant is entitled to take the credit. SMS Service Campaign - HELD THAT:- Advertisement of the Service Station of the Appellant is essential as it has to attract customers for servicing automobiles. It is not disputed that service station is not located at the place indicated by the Appellant. Hence, credit can be availed by the Appellant on service tax paid on advertising expenses. Courier Agency Services - HELD THAT:- The Adjudicating Authority could not have denied credit only for the reason that the invoices issued by the service providers did not contain the registration number - credit allowed. Mobile Phone Services - credit denied to the Appellant for the reason that the invoices against which credit was availed, were raised upon individual users of mobile phones (employees of the Appellant) and not the Appellant - HELD THAT:- The Department has not produced any evidence to rebut the presumption that the mobile phones were used in connection with the business of the Appellant - the Appellant is clearly entitled to avail the credit for mobile phones since the mobile phones were provided by the Appellant and payment of the bills was also made by the Appellant. Security Services And Chartered Accountant Services - HELD THAT:- The appellant entitled to credit following earlier decisions. Consultancy Services - HELD THAT:- When the order on which reliance was placed in the show cause notice has been set aside, the Appellant is entitled to avail the Cenvat Credit. Advertising and Event Management Services - Credit denied on the ground that there is no evidence to establish a nexus between the input and output service and that the amount incurred was reimbursed to the Appellant - HELD THAT:- The Appellant is, therefore, clearly entitled to avail the benefit of Cenvat Credit following earlier decision. Manpower Recruitment Service, Test Inspection & Certification Service, Architect Service, Insurance Service and other Repair & Maintenance Services - HELD THAT:- Appellant entitled to credit following earlier decoision. Valuation - Inclusion of the value of spare parts in assessable value - HELD THAT:- When spare parts are sold while providing “Authorised Service Station Service”, a sale tax place and VAT is charged by the Appellant. The Department, therefore, cannot levy service tax on the value of the spare parts. This is also clear from the Circular dated 23 August 2007 issued by the Department - demand set aside. Levy of service tax - amount received under warranty claims - HELD THAT:- In view of the Circular dated 23 August 2007, the service can be classified under “Authorised Service Station Service” but not under “Business Auxiliary Service” - leviability of service tax on this head, therefore, has to be set aside. Levy of service tax - commission received from banks - HELD THAT:- A demand cannot be confirmed under a category different from that proposed in the show cause notice - demand set aside. Imposition of interest and penalty - HELD THAT:- The issues on which demand is set aside, the penalty is also set aside. Appeal allowed in part. Issues Involved:1. Disallowance of inadmissible Cenvat Credit on various input services.2. Inclusion of the value of spare parts/consumables in the gross value for service tax.3. Demand of service tax on warranty charges received.4. Demand of service tax on commission received from insurance companies and banks.5. Imposition of penalties under sections 76/78 of the Finance Act, 2004, read with Rule 15 of the Cenvat Credit Rules, 2004.Issue-wise Detailed Analysis:A. Disallowance of inadmissible Cenvat Credit on various input services:1. Repair and Maintenance of Audio Systems: The Tribunal referenced a previous decision, stating that services availed during the course of business qualify as input services. The Appellant is entitled to Cenvat Credit for repair and maintenance services as they are integral to the servicing of cars.2. Pollution Equipment: The credit was denied on the grounds of non-submission of invoices, which the Appellant rebutted by providing necessary documents. The Tribunal found the Appellant entitled to credit as pollution equipment is essential for maintaining pollution standards.3. SMS Service Campaign: The Tribunal accepted the Appellant's argument that advertising through SMS is essential for attracting customers, thus allowing the credit.4. Courier Agency Services: Credit was initially denied due to the absence of service tax registration numbers on invoices. The Tribunal, referencing a previous decision, allowed the credit as long as the payment of tax was established.5. Mobile Phone Services: Credit was denied because invoices were raised to individual users. The Tribunal ruled in favor of the Appellant, referencing previous decisions that allowed credit when the service was used for business purposes and the bills were paid by the Appellant.6. Security Services and Chartered Accountant Services: Credit was denied due to unclear usage locations. The Tribunal, referencing a previous decision, allowed the credit as the services were used in the business operations.7. Consultancy Services: Credit was denied due to insufficient nexus with output services and reimbursement. The Tribunal allowed the credit, referencing a previous decision that set aside the earlier order.8. Advertising and Event Management Services: Credit was denied due to lack of evidence of nexus and reimbursement. The Tribunal allowed the credit, referencing a previous decision.9. Manpower Recruitment Service, Test Inspection & Certification Service, Architect Service, Insurance Service, and other Repair & Maintenance Services: Credit was denied based on a previous order, which the Tribunal had set aside. The Tribunal allowed the credit.B. Inclusion of the value of spare parts/consumables in the gross value for service tax:1. The Appellant argued that spare parts sold during servicing are subject to VAT, not service tax. The Tribunal referenced a Department Circular and previous decisions, ruling that service tax cannot be levied on the value of spare parts sold during servicing.C. Demand of service tax on warranty charges received:1. The Appellant contended that the amount received from manufacturers for warranty services is not subject to service tax. The Tribunal referenced a Department Circular and a previous decision, ruling in favor of the Appellant.D. Demand of service tax on commission received from insurance companies and banks:1. The Appellant argued that it did not provide 'Business Auxiliary Service' to banks, merely forwarding forms. The Tribunal referenced a previous decision, ruling that the demand cannot be confirmed under a different category than proposed in the show cause notice, thus setting aside the demand.E. Imposition of penalties under sections 76/78 of the Finance Act, 2004, read with Rule 15 of the Cenvat Credit Rules, 2004:1. Since the demands under issues A, B, C, and D were set aside, the Tribunal ruled that the imposition of interest and penalties does not arise.Conclusion:The Tribunal set aside the impugned orders and allowed the appeals, ruling in favor of the Appellant on all issues.