2019 (6) TMI 270 - AT - Service Tax

CENVAT credit - inputs - furniture and fixtures - input services - Rent a Cab services - Transport of Goods by Road Services - Travel Agent’s Services/ Tour Operator Services - Forex Broker Services - Rule 6(3B) of CCR - extended period of limitation - demand of interest and penalty.

Admissibility of CENVAT Credit on various items of Furniture and Fixture to the provider of Banking and Financial Services - HELD THAT:- The appellant has to take a stand at the time of claiming the CENVAT Credit as to whether he intends to take the credit in respect of the goods under consideration as inputs or capital goods. Once he claims that the goods are capital goods then he has to follow the prescriptions for availing the credit as such. Since the scheme of credit in respect of Capital Goods is not identical with the scheme credit on inputs such flip flop from Capital Goods to inputs should not be permissible - following the decision of Bombay High Court in M/S. BHARTI AIRTEL LTD. (EARLIER KNOWN AS BHARTI TELE-VENTURES LTD.) VERSUS THE COMMISSIONER OF CENTRAL EXCISE [2014 (9) TMI 38 - BOMBAY HIGH COURT] that these goods do not qualify either as Inputs or Capital Goods, we hold that credit is not admissible in respect of these goods.

Admissibility of CENVAT Credit - various input services - club and association services - rent cab service - travel agent service - tour operator service - GTA Services - HELD THAT:- It’s a common knowledge the perks and facilities to the employee even that of ferrying the employees from home to work place or on their relocation from one station to another on transfer etc., are provided not in term of the service contract with the client or a customer, but are provided in terms of the employment contract with the employee. These perks and facilities in terms of the employment contract are to be provided even if at particular period of time there is no output service to any client thus these are provided independent of any transaction in output services. In terms of the employment contract employees in lieu of salary, perk and facilities offered by the employer, provides his services to the employer. Thus all the facilities and perks as referred herein are specific to the employment contract and independent of the service contract that employer enters with recipient of the output service - Since these facilities provided are not the part service contract with the client of Bank they cannot be considered to be used for providing the output services.

With effect from 1st April 2011, the phrase “activities relating to business, such as” has been deleted from the inclusion part of the definition and hence the obligations on the part of appellants to their employees in terms of employment contract, cannot be termed to be covered by the said inclusion clause neither they have been provided in course of providing the output service. Since these facilities have been provided as part of the employment contract of the employee they are purely meant for the personal consumption of the employee and hence are covered by the exclusion clause.

Thus for period prior to 1st April 2011 these services will fall within the category of input services - However for the period post 1st April 2011 we hold that these services when provided for by the appellant to its employee in terms of employment contract do not qualify as input services for providing the output taxable services to the client/ customer in terms of service contract, hence CENVAT Credit in respect of these will not be admissible post 1st April 2011, if any part of these services have been received by the employee after that date - credit allowed in part.

Admissibility of CENVAT Credit - Forex Broker Services - Rule 6(3B) of The CENVAT Credit Rule, 2004 - HELD THAT:- Rule 6(3B) of The CENVAT Credit Rule, 2004 as introduced with effect from 1st April 2011 only provides a manner for determining the amount to be reversed by the banking company and a financial institution including a non-banking financial company every month. This rule do not provide that credit in respect of input services used exclusively for providing the exempted services is admissible subject to reversal of 50% of that - there are no merits in the contention of appellants that order of Commissioner has been passed contrary to intent of Rule 6(3B) - the matter needs to go back to the original adjudicating authority for allowing appellants one more opportunity to substantiate their claim that during the relevant period i.e. from 07.07.2009 to 31.03.2012, they were providing both exempted and taxable output services using this common input service - matter on remand.

Extended period of limitation - proviso to Section 73 (1) - HELD THAT:- In this case certain information which was available with the appellants was never disclosed to revenue, with the intention to evade payment of tax - extended period of limitation as provided for by proviso to Section 73(1) of Finance Act, 1994 is invokable in the present case.

Demand for interest and penalty imposed under Section 78 of Finance Act, 1994 - HELD THAT:- Since the appellants have taken the inadmissible credit and utilized the same for payment of Service Tax, the demand of interest in respect of the inadmissible credit is justified in terms of provisions of Rule 14 of CENVAT Credit Rules, 2004 read with Section 75 of Finance Act, 1994. It is now settled law that interest under Finance Act, 1994 is statutory liability put on the person who has unduly withheld the amounts due to government - the demand of interest on the amounts that would be determined by the Commissioner in remand proceedings upheld.

Penalty u/s 76 and 78 - HELD THAT:- The noticee has claimed inadmissible benefits, which remained privy to them, until unearthed by the audit officers of the service tax Commissionerate. The penalty proposed and mandated under Section 78 of Chapter V of the Finance Act, 1994 in reading of Rule 15(3) and Rule 15(4) of the CENVAT Credit Rules would, thus become imposable on the noticee - no penalty would be imposable under Section 76 of Chapter V of the Finance Act, 1994.

Appeal allowed in part - part matter on remand.