2020 (11) TMI 34 - AT - Service Tax

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 ... Valuation - Includability of diesel, explosives etc. supplied free of cost, in the value of taxable services - Denial of CENVAT credit - excess availment of credit in the absence of bills/challans - non-reversal of credit availed on ‘tippers’ - Demand of interest on suo-moto reversal of credit by the Appellant - extended period of limitation. Valuation - includability of diesel, explosives supplied free of cost in the value of taxable services provided by the Appellant - HELD THAT:- The explosives and accessories and diesel would be supplied by SCCL - Learned Counsel for the Appellant is, therefore, justified in asserting that the explosives and diesel were received by the Appellant free of cost and the learned Authorized Representative of the Department is not justified in asserting that the agreement would indicate that the said materials were received cost by the Appellant but for a consideration and not free of cost - demand set aside. CENVAT Credit - excess availment of credit - HELD THAT:- The Commissioner has concluded that the invoices furnished by the appellant did not add up to the amount of credit claimed to have been availed in September, 2009. This, according to the Appellant, was an absolutely presumptive and inconsequential finding since the Department had disputed the credit only for the reason that there was a difference between the opening stock and the closing stock. The order passed by the Commissioner does not take into consideration the explanation offered by the Appellant and only some invoices were examined by the Commissioner - matter remitted to the Commissioner to determine this particular issue afresh in the light of the charge leveled in the show cause notice and the explanation offered by the Appellant. Whether credit is admissible ‘tippers’ as inputs under rule 2(k) of the Credit Rules? - HELD THAT:- In SOUMYA MINING LTD. VERSUS CCE, RAIPUR [2017 (6) TMI 1071 - CESTAT NEW DELHI], the Tribunal held that even for the period prior to June, 2010 credit was admissible on ‘tippers’ as ‘inputs’ used by the service provider in providing output services. This view was followed by the Tribunal in CCE, CCG & ST, DELHI – III VERSUS M/S BHARMAPUTRA INFRASTRUCTURE LTD. [2018 (7) TMI 438 - CESTAT NEW DELHI] - thus, credit had been correctly availed by the Appellant as ‘tippers’ qualify as ‘input’ under rule 2(k) of the Credit Rule - The demand that has been confirmed cannot, therefore, be sustained and is liable to be set aside. Demand of Interest on suo-moto reversal of credit by the Appellant - HELD THAT:- When credit was reversed by the Appellant without utilization, no interest can be recovered from the Appellant - demand of interest set aside. Extended period of Limitation - HELD THAT:- It is not necessary to examine the contention raised by the Appellant that the extended period of limitation could not have been invoked. Appeal allowed in part and part matter on remand. 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.