CENVAT credit eligibility on input services barred penalty where credit was held admissible under settled interpretation.

Penalty was not leviable where the assessee was held entitled to CENVAT credit on service tax paid for input services, including rent-a-cab, air travel agency, outdoor catering and servicing of motor vehicles. The authorities had already accepted that availment of credit was not erroneous, and the dispute was resolved by the settled interpretation of the CENVAT credit regime, following the Larger Bench decision in ABB Ltd. On that basis, denial of credit could not support penal action.

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Issues: Whether penalty was exigible when the assessee was held entitled to CENVAT credit on service tax paid on input services.

Analysis: The lower authorities had held that the availment of CENVAT credit was not erroneous and that no penalty was imposable. The appeal turned on denial of credit in respect of input services such as rent-a-cab, air travel agency, outdoor catering services, and servicing of motor vehicles. The earlier appeal of the assessee had already been allowed on the basis of the settled interpretation of the CENVAT credit regime, following the Larger Bench decision in ABB Ltd.

Conclusion: Penalty was not leviable, as the assessee was eligible for CENVAT credit on the services in question.

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