2023 (5) TMI 1081 - AT - Service Tax

CENVAT Credit - providing taxable as well as exempted services - non-maintenance of separate records - contravention of Rule 6 (3) of Cenvat Credit Rules 2004 - availment of credit of input services utilized in the execution of works contract service. HELD THAT - The appellant has filed/submitted ST-3 returns for the period April to September 2009 in which they have certainly shown the amount received towards exempted services other than export in respect of Industrial or Commercial Construction Service and nil in respect of Residential Construction Service and Works Contract Service. However on going through the ST-3 returns for the period 2009-2010 we do not find any such declaration on the part of the appellant. The appellant claimed that they have not availed Cenvat credit either on inputs or on input services in respect of exempted services in the category of Commercial Construction Service or Residential Construction Service wherever provided - it is incorrect on the part of the Adjudicating authority to came to a conclusion that the appellant availed Cenvat credit on the basis of ST-3 returns which shows income under exempted services. It is not the case of the appellant that he has not provided any exempted services. It is found that the concept of partial exempted service came into effect from 01.07.2012 by virtue of Notification No. 28/2012. Therefore the contention of the appellant is agreed upon that during the relevant time there was no concept of partial exemption and even after 01.07.2012 such partial exemption was with the condition that the said exemption if any should be subject to non-availment of Cenvat credit on inputs and input services. The appellant claimed Cenvat credit only in respect of input services used for providing Works Contract Service - It can be seen that there is no bar under the said rule for availment of Cenvat credit on input services. The bar was only on inputs. Moreover Adjudicating authority erred in holding that the appellant has availed simultaneous benefit of abatement and of Cenvat credit. The appellant submitted that the condition of non-availment of Cenvat credit has been fulfilled in respect of Construction Services and only in respect of Works Contract Service where there is no express bar on the availment of Cenvat credit on input services they have availed such credit. Neither the SCN nor the impugned order identify the specific import services availed both for dutiable and exempted services; they do not qualify the credit availed on common input services. Without doing so confirming the demands on the basis of mere allegations in the SCN is not legally tenable. The appellant has submitted a certificate dated 14.02.2011 issued by M/s Nirbhaya Associates Chartered Accountant - the said certificate also provides site-wise credit availed by the appellant. The Adjudicating authority has not discussed anything about the said Chartered Accountant certificate. He has not recorded any findings as to why the Chartered Accountant certificate should be dis-regarded. It is not correct on the part of the Adjudicating authority to pass an order without going through the contents of the said Chartered Accountant certificate; without causing reasonable verification of the same and without negating in the same with cogent evidence and reasons. The Courts and the Tribunal have time and again held that a certificate issued by a professional cannot be dis-regarded or over-looked without adducing cogent evidence to prove that the said certificate is incorrect. The impugned order is passed without properly going through the submission of the appellant and without going through the records of the case. Adjudicating authority s findings in respect of availment of Cenvat credit in respect of ICCS RCCS are factually incorrect. Adjudicating authority erred seriously in applying the concept of partial exemption which came into existence on 01.07.2012 to the impugned order period which is much before that date - Appeal allowed.

Summary

Issues involved:
The issues involved in this case include the appellant's alleged failure to maintain separate records of credit utilized in exempted and dutiable services, the demand for recovery of service tax, imposition of penalties under relevant provisions, and the contention regarding the maintenance of site-wise records for availing Cenvat credit.

Summary of Judgment:

Issue 1: Failure to maintain separate records and recovery of service tax

The Department alleged that the appellant did not maintain separate records showing the credit utilized in exempted and dutiable services, contravening Rule 6 (3) of Cenvat Credit Rules, 2004. Show cause notices were issued seeking recovery of service tax. The Adjudicating authority confirmed the demands and imposed penalties. The appellant challenged the order, arguing that the SCNs were issued mechanically without proper identification of common inputs. The appellant claimed to maintain site-wise records and take Cenvat credit only for taxable projects. The Tribunal found discrepancies in the appellant's submissions and the ST-3 returns, noting the lack of supporting bills for Cenvat credit. The Adjudicating authority's conclusion based on ST-3 returns was deemed legally untenable.

Issue 2: Availment of Cenvat credit and concept of partial exemption

The appellant contended that they did not avail Cenvat credit for exempted services under Construction Services but only for Works Contract Services. The Tribunal noted that the concept of partial exemption was not applicable during the relevant period and that the Adjudicating authority erred in invoking it. The appellant's claim of availing Cenvat credit only for input services in Works Contract Service was accepted, as there was no bar on such credit under the relevant rules. The Tribunal found the Adjudicating authority's findings factually incorrect and set aside the order due to the misapplication of the concept of partial exemption and failure to consider the Chartered Accountant certificate provided by the appellant.

Conclusion:

The Tribunal allowed the Service Tax Appeals, emphasizing the importance of proper verification of submissions and certificates provided by professionals. The impugned order was set aside due to factual inaccuracies, incorrect application of legal provisions, and failure to consider the appellant's contentions and evidence.

(Order pronounced in open court on 26/05/2023.)