2021 (4) TMI 579 - AT - Service Tax

Appellant wins appeal for input credit on advertisement services

The appellant, a ceramic tile manufacturer, disputed the denial of input credit on services from an advertisement agency classified under Business ... Recovery of CENVAT Credit - recipient of service - payment of service tax under wrong head - appellant was liable to pay service tax under the BAS but instead they have paid under the head “Advertisement Services” - period March, 2010 to March, 2014 - HELD THAT:- The SCN is wholly mis-conceived as the Department has attempted to classify the service in dispute in the hands of the receipt of service - It has been held by the Hon’ble Supreme Court in the case of SARVESH REFRACTORIES (P) LTD. VERSUS COMMISSIONER OF C. EX. & CUSTOMS [2007 (11) TMI 23 - SUPREME COURT] that cenvat credit cannot be denied questioning the assessment of service classification of the service provider, at the end of the recipient of service. Thus, in terms of Rue 2 (l) of CCR, the appellant is entitled to take cenvat credit of any input service, which is received, by whatever name called, which is utilised in the manufacture of dutiable goods, or providing of taxable output service - credit allowed - appeal allowed - decided in favor of appellant. Issues: Dispute over input credit on services of advertisement agency, classification of services under Business Auxiliary Services vs. Advertising Agency Services, extended period of limitation for recovery, remand by Tribunal, reduction of disputed amounts by Commissioner, entitlement to cenvat credit, change of opinion by the Department, reliance on circulars, classification of service in dispute, denial of cenvat credit based on service provider's classification, entitlement to cenvat credit for input services received.The judgment involves a dispute regarding the appellant, engaged in manufacturing ceramic tiles, availing input credit on services provided by an advertisement agency. The Department alleged that the service provider, Crayons Advertising Ltd., was liable to pay service tax under Business Auxiliary Services (BAS) instead of Advertising Agency Services as per the Finance Act, 1994. The Department proposed to recover the amount of Rs. 93,40,250/- for the disputed period and issued show cause notices invoking the extended period of limitation. The Tribunal initially allowed the appeals by way of remand, directing the adjudicating authority to consider the submissions made by the appellant.In subsequent proceedings, the Commissioner reduced the disputed amounts to Rs. 96,702/- and Rs. 55,315/- for the two show cause notices, respectively, along with equal penalties. The appellant challenged this decision before the Tribunal, arguing that they were entitled to avail cenvat credit for the services provided by various advertising agencies. The appellant contended that the Department's reliance on circulars regarding service classification was erroneous and that the appellant had paid the service tax on the invoices raised by the advertising agencies, making them eligible for cenvat credit under the Cenvat Credit Rules, 2004.The Tribunal, after considering the arguments, found the show cause notice to be misconceived as the Department had attempted to classify the service based on the recipient rather than the provider. Citing legal precedents, the Tribunal held that cenvat credit cannot be denied based on the service provider's classification. The Tribunal concluded that the appellant was entitled to avail cenvat credit for the input services received, as per Rule 2(l) of the Cenvat Credit Rules. Consequently, the appeal was allowed, the impugned order was set aside, and the appellant was granted consequential benefits in accordance with the law.