2023 (5) TMI 891 - AT - Service Tax

Tribunal allows appeal, Rule 14 not applicable to ISD. Denial of Cenvat credit on Air Travel Services unsustainable.

M/s. UltraTech Cement Ltd. Versus Commissioner of CGST, Mumbai East

The Tribunal allowed the appeal, holding that the proceedings initiated under Rule 14 were not applicable to the appellant as an ISD. The denial of Cenvat ... CENVAT Credit - availment and distribution of credit - Input services - insurance services - car hiring service - hotel services and air travel services - HELD THAT:- From the facts it is clear that the present show cause notice is in continuation of the show cause notices issued earlier and as noted also in the order of the original authority. Appeal against confirmation of the first three show cause notices was considered by the Tribunal M/S ULTRATECH CEMENT LTD. VERSUS COMMISSIONER OF CGST & CENTRAL EXCISE, MUMBAI EAST [2019 (3) TMI 2026 - CESTAT MUMBAI] Tribunal has observed that The above disputed services were used/utilized by the appellant for accomplishing the business purpose of ultimate manufacture of final products, removed from the factory on payment of appropriate Central Excise duty. All the disputed services are falling under the definition of input service for taking of Cenvat Credit of service tax amount paid thereon. The issue with regard to consideration of the disputed services as defined ‘Input Service’ is no more res integra in view of the decisions relied upon by the Ld. Advocate for the appellant. Therefore, as per the settled principal of law, denial of Cenvat Credit on this ground also is not sustainable. As the appeal in respect of the first three show cause notices have been allowed, these proceedings which are sequel to the earlier proceedings need also to be considered in the light of the above order and allowed. Appeal allowed. Issues Involved:1. Admissibility of Cenvat credit on Air Travel Services.2. Recovery of interest from the appellant.3. Imposition of penalties on the appellant.Issue-wise Detailed Analysis:1. Admissibility of Cenvat Credit on Air Travel Services:The core issue was whether the appellant could claim Cenvat credit on Air Travel Services used by employees for business purposes. The Commissioner (Appeals) noted that the definition of 'input service' under Rule 2(l) of the Cenvat Credit Rules, 2004, was amended effective from 01.04.2011, removing the phrases 'activities related to the business' and 'such as.' This amendment narrowed the scope of what could be considered input services. The Commissioner emphasized that the services must have a direct nexus with the output services provided by the appellant. The appellant failed to produce sufficient documentary evidence to establish that the Air Travel Services were used directly in providing output services. Consequently, the Cenvat credit on these services was disallowed.2. Recovery of Interest:The Commissioner (Appeals) upheld the recovery of interest on the disallowed Cenvat credit amount. The adjudicating authority had ordered the recovery of interest under Rule 14 of the Cenvat Credit Rules, 2004, read with Section 75 of the Finance Act, 1994. The appellant's failure to substantiate the use of input services for output services justified the interest recovery.3. Imposition of Penalties:The original adjudicating authority had imposed penalties under Section 76 and Section 77(2) of the Finance Act, 1994, read with Rule 15(1) of the Cenvat Credit Rules, 2004. However, the Commissioner (Appeals) set aside the penalty imposed under Section 76. The penalty under Section 77(2) was upheld due to the appellant's contravention of the Cenvat Credit Rules, 2004.Tribunal's Observations and Decision:The Tribunal noted that the present show cause notice was a continuation of earlier notices, and appeals against the first three notices had been allowed by the Tribunal. The Tribunal had previously held that Rule 14 of the Cenvat Credit Rules, 2004, applied to manufacturers or service providers who availed or utilized Cenvat credit, not to Input Service Distributors (ISD). The appellant, being an ISD, merely distributed the credit and did not avail or utilize it. Therefore, the proceedings initiated under Rule 14 were not in conformity with the Cenvat statute.The Tribunal also observed that the disputed services were used for business purposes, and the denial of Cenvat credit was not sustainable. Consequently, the Tribunal allowed the appeal, setting aside the orders of the lower authorities.Conclusion:The Tribunal allowed the appeal, holding that the proceedings initiated under Rule 14 were not applicable to the appellant as an ISD. The denial of Cenvat credit on Air Travel Services was also found to be unsustainable. The recovery of interest and imposition of penalties were set aside, and the appeal was allowed in favor of the appellant.