2024 (5) TMI 130 - AT - Service Tax

CENVAT Credit - Availment of CENVAT credit on input services - availment of CENVAT credit on inadmissible documents - non-payment of amount under rule 6(3)(i) of CENVAT credit rules - non-payment of service tax on manpower recruitment or supply agency services. Availment of credit on certain input services - HELD THAT - The term input services is very wide and cannot be restricted to any specific type and nature of input services. However with the introduction of exclusion clauses A to C it is clear in no uncertain terms that CENVAT credit can be availed on all the input services which are used by the service provider for providing output services as well as services that are covered and defined in the inclusive part of the definition with the specific exclusions - the meal vouchers being provided to the employees prior to 1.4. 2011 the same is a welfare activity - Tribunal in the case of ANDRITZ TECHNOLOGIES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL TAX BANGALORE 2019 (12) TMI 122 - CESTAT BANGALORE has held that As far as Food coupons/sodexo coupons are concerned I find that these services are in the nature of welfare service and purely for personal consumption of employees as these are perquisites allowed to the employees. Further I find that Commissioner (Appeals) has given reasons for denying the Cenvat credit on sodexo coupon and I do not find any fault in that and uphold the same. For the period post 1.4.2011 there is a specific exclusion provided under clause C to Rule 2(I) that outdoor catering service if used for personal use or consumption of any employee is not considered to be input service. Therefore there are no infirmity in the impugned order in this regard. Credit availed on the accommodation provided to staff - HELD THAT - The service of accommodation was necessary for the purposes of providing the service of consulting engineering services and is integrally connected with the same. Perquisites are generally meant for the comfort convenience and welfare of the employees. Even though it has been argued that perquisites do fall within the scope of input service the benefit of Cenvat credit still cannot be allowed as any activity for the comfort convenience and welfare of its employees cannot be treated as having been done in course of furtherance of business - Bombay High Court in the case of CCE VERSUS MANIKGARH CEMENT 2010 (10) TMI 10 - BOMBAY HIGH COURT held that in the present case in our opinion rendering taxable services at the residential colony established by the assessee for the benefit of the employees is not an activity integrally connected with the business of the assessee and therefore the tribunal was not justified in holding that the services such as repairs maintenance and civil construction rendered at the residential colony constitutes input service so as to claim credit of service tax paid on such services under Rule 2(1 ) of the CENVAT Credit Rules 2004. - there is no infirmity the findings of the adjudicating authority in the impugned order in this regard. Availment of credit on inadmissible documents - HELD THAT - All the services for which input credit was taken had actually been received by the appellant and the incidence of Service Tax had been borne by the appellant. Not mentioning certain particulars in the invoice is only a procedural error and the availment of CENVAT credit is a substantive benefit which cannot be denied on procedural grounds - as per the proviso to Rule 9(2) of the Credit Rules as long as all the critical details mentioned therein are available on the invoice the same would be a valid document for taking credit. No evidence has been brought forward by the Department to state that the inputs were not duty paid. Merely for the said discrepancies Cenvat credit cannot be denied as held in catena of judgments some of which have been cited by the Learned Counsel so long as it is not in dispute that the service tax was paid by the service provider. In fact the appellant has produced an affidavit from the seller of the goods that the duty tax had been paid. Accordingly the Commissioner had erred in disallowing the credit on such invoices. Non-payment of an amount under Rule 6(3)(i) of the credit rules for providing consulting engineer service in Jammu and Kashmir for the period 2009 10 to 2012 13 - HELD THAT - The impugned order has held that the credit reversed by the appellant for the period October 2013 to March 2014 does not pertain to the period in dispute. It has been argued that the detailed calculation was for the Cenvat credit reversal for the period 2008-09 to 2012-13. It is noted that in several decisions it has been consistently held that when proportionate credit has been reversed the department cannot fasten liability under Rule 6(3)(i) of the Credit rules - The Tribunal in the case of RESPONSIVE INDUSTRIES LTD. AND AXIOM CORDAGES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE THANE-II 2022 (8) TMI 639 - CESTAT MUMBAI had examined the above issue in respect of the appellant who had reversed the Cenvat credit in respect of exempt services by holding that inasmuch as the quantum or method adopted by the appellant was not questioned by the department the demand of Cenvat credit cannot be sustained - the appellants have reversed the credit attributable to the inputs/inputs services alleged to have been used in the provision of exempted service - the demand on account of the said issue is liable to be set aside. Taxability of services under manpower recruitment of supply agency services - H ELD THAT - In view of the decision of the Supreme Court in C.C., C.E. S.T. BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. 2022 (5) TMI 967 - SUPREME COURT it has to be held that the demand can be confirmed for the normal period only and the demand for the extended period cannot be sustained. Interest and penalty - HELD THAT - The demand for interest upheld by relying on Supreme Court judgment in the case of PRATIBHA PROCESSORS VERSUS UNION OF INDIA 1996 (10) TMI 88 - SUPREME COURT wherein the Hon ble Supreme Court held that the levy of interest is compensatory and automatic. Penalties imposed under Sections 76 77 78 - HELD THAT - The department has not been able to establish the ingredients of malafide intention of the appellant to evade payment of service tax. Hence the penalties imposed on the appellant is set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Availment of CENVAT credit on certain input services.
2. Availment of CENVAT credit on inadmissible documents.
3. Non-payment of amount u/r 6(3)(i) of CENVAT Credit Rules.
4. Non-payment of service tax on manpower recruitment or supply agency services.

Summary of Judgment:

1. Availment of CENVAT Credit on Certain Input Services:
The Tribunal examined the definitions of "input service" across different periods and noted that input services must be used by the service provider for providing output services. The Tribunal found that meal vouchers provided to employees prior to 01.04.2011 were welfare activities and not input services. Post 01.04.2011, such services were explicitly excluded. Similarly, accommodation provided to staff was for welfare and not integrally connected to business activities, thus not qualifying as input services. The Tribunal upheld the denial of CENVAT credit on these grounds.

2. Availment of CENVAT Credit on Inadmissible Documents:
The Tribunal noted that Rule 9(2) of the Credit Rules allows CENVAT credit if certain critical details are present on the invoice, even if all particulars are not mentioned. The Tribunal found that the appellant had received the services and borne the service tax. Therefore, it held that the Commissioner erred in disallowing credit merely due to the absence of serial numbers on invoices.

3. Non-payment of Amount u/r 6(3)(i) of CENVAT Credit Rules:
The Tribunal found that the appellant had reversed the proportionate credit for services provided in Jammu and Kashmir before the issuance of the show cause notice. It held that when proportionate credit is reversed, the department cannot impose liability under Rule 6(3)(i) of the Credit Rules. The Tribunal set aside the demand on this issue.

4. Non-payment of Service Tax on Manpower Recruitment or Supply Agency Services:
The Tribunal noted that the appellant had hired foreign employees who were on its payroll, fulfilling all statutory requirements. The Tribunal acknowledged the Supreme Court's decision in CCE vs. Northern Operating System, which clarified that such secondment arrangements are liable for service tax. However, it held that the extended period of limitation could not be invoked as there was no malafide intention or suppression by the appellant. The demand was upheld only for the normal period.

Interest and Penalties:
The Tribunal upheld the demand for interest, citing the Supreme Court judgment in M/s Pratibha Processors vs Union of India, which held that interest is compensatory. However, it set aside the penalties imposed under Sections 76, 77, and 78, as the department failed to establish malafide intention by the appellant.

Conclusion:
The impugned order was modified to set aside the following:
1. CENVAT Credit availed on inadmissible documents.
2. Proportionate Credit under Rule 6(3)(i) of CENVAT Credit Rules, already reversed before the show cause notice.
3. Demand for the extended period.
4. Penalties imposed.

The remaining findings of the impugned order were upheld, and the appeal was partially allowed.