Tribunal sets aside most demands, remits CENVAT credit issue for fresh determination

The Tribunal set aside all demands confirmed by the Commissioner except for the disallowance of CENVAT credit amounting to Rs. 30,05,484/-, which was remitted for fresh determination. The Appeal was allowed to the extent indicated above.

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Issues Involved:
1. Includability of diesel, explosives, etc. supplied free of cost in the value of taxable services.
2. Denial of CENVAT credit on two counts: excess availment of credit in the absence of bills/challans and non-reversal of credit availed on 'tippers'.
3. Demand of interest on suo-moto reversal of credit by the Appellant.

Detailed Analysis:

1. Includability of Diesel, Explosives, etc. Supplied Free of Cost:

The Appellant argued that materials received free of cost should not be included in the taxable value of services, citing the Supreme Court's decision in *Commissioner of Service Tax v/s Bhayana Builders (P) Ltd.*, which held that free-of-cost goods/materials provided by the service recipient should not be included in the gross amount charged by the service provider. The Department, however, claimed that these materials were part of the consideration and should be included in the taxable value.

The Tribunal concluded that the materials were indeed supplied free of cost and referenced the Supreme Court's ruling in *Bhayana Builders*, which supports the Appellant's position. Additionally, Rule 5(1) of the Valuation Rules, which was relied upon by the Department, had been struck down by the Supreme Court in *Union of India v/s Intercontinental Consultants and Technocrats Pvt. Ltd.*. Consequently, the demand of Rs. 14,07,98,655/- was not sustainable and was set aside.

2. Denial of CENVAT Credit:

a. Excess Availment of Credit:

The Commissioner disallowed CENVAT credit of Rs. 30,05,484/- due to discrepancies between the closing balance in September 2009 and the opening balance in October 2009. The Appellant claimed this was due to a clerical error, which was corrected in the subsequent return. The Tribunal found that the Commissioner did not adequately consider the Appellant's explanation or the CENVAT register and remitted the issue back to the Commissioner for re-evaluation.

b. Credit on 'Tippers':

The Commissioner disallowed credit on 'tippers' amounting to Rs. 64,91,195/- as credit on such goods was only admissible from June 22, 2010. The Appellant argued that 'tippers' qualify as 'inputs' under Rule 2(k) of the Credit Rules and cited the Tribunal's decision in *Soumya Mining Ltd. v. Commissioner of Central Excise, Raipur*, which supported their claim. The Tribunal agreed with the Appellant, setting aside the demand and confirming that credit on 'tippers' was admissible.

3. Demand of Interest on Suo-Moto Reversal of Credit:

The Department demanded interest of Rs. 6,53,650/- on the suo-moto reversal of credit. The Appellant had already paid Rs. 2,46,561/- as interest, computed from the date of availment to the date of reversal. The Tribunal referenced several decisions, including *Commissioner of Central Excise & Service Tax LTU, Bangalore v/s Bill Forge Pvt. Ltd.*, which held that no interest is recoverable when credit is reversed without utilization. Thus, the demand for interest was not sustainable and was set aside.

Conclusion:

The Tribunal set aside all demands confirmed by the Commissioner except the disallowance of CENVAT credit amounting to Rs. 30,05,484/-, which was remitted to the Commissioner for fresh determination. The Appeal was allowed to the extent indicated above.

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