Whether credit of input service used for the purpose of sale be taken?

PJ/Case Law/2014-15/2186

Case:- AR.A.S. MOTORS (P) LTD. Vs COMMISSIONER OF CENTRAL EXCISE, MADURAI

Citation:- 2014 (33) S.T.R. 408 (Tri. - Chennai)

Brief facts:- The facts of the case in brief were that the appellants were providing service as well as sales from their common premises and they were under the bona fide belief that they could take credit of tax paid on input services which they had utilized for both purposes. The amount of credit involved on services which have been utilized for sale amounted to Rs. 71,965/-. Hence, a the penalty of Rs. 71,965/- was imposed on the appellant vide impugned order.

Appellant’s contentions:- The learned counsel appearing for the appellants stated that the appellants were providing service as well as sales from their common premises and they were under the bona fide belief that they could take credit of tax paid on input services which they had utilized for both purposes. The amount of credit involved on services which have been utilized for sale amounted to Rs. 71,965/-. Neither the amount nor the inadmissibility of the credit were being challenged by the appellants. The learned counsel stated that since the credit was taken inadvertently, under the bona fide belief that the same was admissible, he requests for waiver of the entire penalty.

Respondent’s contentions:- The learned DR supported the impugned order.

Reasons of judgment:- After considering submissions from both sides, the Hon’ble judge found that this was not a case of availing irregular credit by reason of fraud, collusion etc. This was a case where the appellants were under the bona fide belief that credit of service tax paid on all the services utilized by them both for providing authorized service and for sale was available to them and they have paid the service tax subsequently. He was of the view that this was a case which was squarely covered under the provisions of Rule 15(1) of the CENVAT Credit Rules, 2004 which prescribes a maximum penalty of Rs. 2,000/- for taking or utilizing CENVAT credit wrongly. Hence the penalty of Rs. 71,965/- was reduced to Rs. 2,000/- (Rupees two thousand) only. The appeal was thus partly allowed.

Decision:- Appeal partly allowed.

Comment:- The analogy drawn from the case is that if the assessee takes credit of all input services utilized by them both for providing authorized service and for sale with a bonafide belief and not by reason of fraud, collusion etc., such a case shall be covered under the provisions of Rule 15(1) of the CENVAT Credit Rules, 2004 which prescribes a maximum penalty of Rs. 2,000/- for taking or utilizing CENVAT credit wrongly.

Prepared by:- Ranu Dhoot

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PJ/Case Law/2014-15/2186

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