2022 (4) TMI 72 - AT - Service Tax

Tribunal overturns decision, finds no further liability for disputed credit period.

M/s. Popular Vehicles and Services Ltd. Versus Commissioner of GST & Central Excise, Chennai

M/s. Popular Vehicles and Services Ltd. Versus Commissioner of GST & Central Excise, Chennai - 2022 (63) G. S. T. L. 227 (Tri. - Chennai) Issues Involved:1. Wrongful Availment of CENVAT Credit2. Reversal of Proportionate Credit under Rule 6(3A) of CENVAT Credit Rules, 20043. Calculation of Demand for Reversal of Credit4. Imposition of PenaltiesIssue-wise Detailed Analysis:1. Wrongful Availment of CENVAT Credit:The appellants, authorized dealers for automobiles and accessories, were engaged in promotional activities and marketing of insurance and financial products, receiving commissions for these services. The department observed that the appellants availed CENVAT credit on input services used for both taxable services and exempted sales activities, necessitating a reversal of credit as per Rule 6(3A) of CENVAT Credit Rules, 2004. A Show Cause Notice (SCN) dated 26.3.2012 was issued for the period October 2010 to September 2011, proposing to demand Rs. 4,76,362/- for wrongly availed and utilized credit. The original authority confirmed this demand along with interest and penalties, which was upheld by the Commissioner (Appeals) but later remanded by the Tribunal for denovo adjudication.2. Reversal of Proportionate Credit under Rule 6(3A) of CENVAT Credit Rules, 2004:In the denovo adjudication, the original authority held that the appellant wrongly availed credit of Rs. 3,70,181/- for the period October 2010 to September 2011 and confirmed the demand along with interest and penalties. The appellant argued that they had reversed more credit than required, specifically Rs. 4,12,547/- for the period April 2011 to September 2011, which was higher than the required Rs. 59,961/-. The original authority initially agreed that no reversal was required for security and maintenance services for October 2010 to March 2011 but erroneously concluded that the appellant had not reversed the credit, confirming a demand of Rs. 3,70,181/-.3. Calculation of Demand for Reversal of Credit:The appellant contended that the demand of Rs. 4,76,362/- was inflated and provided detailed calculations showing that they had reversed Rs. 18,53,982/- in total, much higher than the amount arrived at by the original authority. The learned AR presented detailed calculations indicating that the correct reversal amount should be Rs. 8,36,253/-, with a balance payable of Rs. 4,23,706/- after considering the already reversed amount of Rs. 4,12,547/-. The adjudicating authority’s calculations were based on incorrect figures, leading to an erroneous demand.4. Imposition of Penalties:The original authority imposed a penalty of Rs. 37,000/- under Rule 15(1) of CENVAT Credit Rules, 2004 r/w section 76 of the Finance Act, 1994, and a separate penalty of Rs. 5,000/- under section 77 of the Finance Act, 1994. The Commissioner (Appeals) remanded the matter for examining the appellant’s claim of higher reversal but did not interfere with the confirmation of interest and penalties. The Tribunal, after reviewing the submissions and calculations, concluded that the appellant had not carried forward the CENVAT credit closing balance of Rs. 14,41,435/- from March 2011 to April 2011, effectively reversing the credit in their books of account, thus extinguishing their liability.Conclusion:The Tribunal set aside the impugned order, allowing the appeal with consequential relief, noting that the appellant had no further liability to reverse the credit for the disputed period. The detailed and fair submission by the learned AR regarding the calculations was highly appreciated. The judgment was pronounced in open court on 31.3.2022.