Tribunal allows cenvat credit for service tax, revokes penalties

The Tribunal ruled in favor of the appellant, holding that the cenvat credit utilized for service tax payment was admissible. The demand by the Revenue was set aside, penalties were revoked, and the appeal was allowed with consequential benefits.

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Issues:
1. Utilization of cenvat credit for service tax payment
2. Admissibility of cenvat credit on input services for construction
3. Double demand of service tax

Analysis:

Issue 1: Utilization of cenvat credit for service tax payment
The main issue in this appeal was whether the appellant correctly utilized cenvat credit for the payment of service tax and if the same tax could be demanded again. The appellant availed cenvat credit for various services used in the construction of a mall and a building in Noida. The Revenue contended that the credit on services used for the mall was not admissible as the mall was not dutiable under the Central Excise Act or the Service Tax Act. The audit proposed to disallow the credit and demanded the amount utilized for service tax payment. The Additional Commissioner disallowed the credit, demanded service tax, imposed penalties, and interest. However, the Commissioner (Appeals) remanded the matter for re-examination regarding the credit availed for services other than the construction of the mall.

Issue 2: Admissibility of cenvat credit on input services for construction
The Commissioner (Appeals) held that the service portion of the work contract for construction work was excluded from input service, but there was no restriction on other input services for the construction of the mall. The appellant argued that the credit utilized for service tax payment was admissible under Rule 3(4)(e) of the Cenvat Credit Rules, and any doubt on eligibility could result in disallowance of a particular credit only. The Tribunal found that the appellant rightly utilized the cenvat credit for service tax payment, and the demand by the Revenue was set aside. Penalties were also revoked.

Issue 3: Double demand of service tax
Regarding the double demand of service tax, the Commissioner (Appeals) determined that the liability was due to the building, and the credit used for service tax payment was not admissible. The Tribunal upheld this decision, stating that there was no duplication of demand and the demand was rightly made. The appellant's appeal was allowed with consequential benefits, and the impugned order was modified accordingly.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the cenvat credit utilized for service tax payment was admissible, and the demand by the Revenue was set aside. The penalties imposed were also revoked, and the appeal was allowed with consequential benefits.

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