In a recent case, the Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) as a relief to Hyundai Motors held that Cenvat Credit on roadside assistance not fall under input service under Rule 2(l) of Cenvat Credit Rules (CCR), 2004 as the service was utilised beyond the place of removal.
M/s. Hyundai Motor India Ltd. ( ‘Assessee’) being aggrieved by the impugned Order-in-Original passed by the Commissioner of Central Excise, LTU confirming the demands of Rs.3,54,57,994/- under Rule 14 of Cenvat Credit Rules, 2004 (CCR) read with Section 11A(4) of Central Excise Act, 1944 (Act) and imposing penalty of Rs.1,77,28,997/-, under Rule 15(2) of CCR read with Section 11AC of the Act.
Step by Step Guidance for Tax Audit & E-filing, Click Here
The Assessee who is engaged in the manufacture and trading of motor cars had availed irregular Cenvat Credits during the period from 2009-10 to 2011-12 and had reversed the credits amounting to Rs.2,75,51,787/- subsequently on being pointed out by the Revenue. However, the Revenue felt that such reversal of wrong Cenvat credit was liable to be recovered along with interest of Rs. 79,32,352/-under Rule 14 of CCR.
Other issues taken up by the department pertained to ineligible Cenvat credit of Rs.79,25,843/- which was availed on Roadside Assistance Service, input service credit on service utilised for study on Automobile Manufacturing Investment, credit on demurrage charges incurred, credit taken on traded goods, credit taken on canteen equipment and maintenance and double credits which were not reversed.
A Show Cause Notice was issued to the assessee seeking recovery of ineligible Cenvat along with applicable interest under Rule 14 of CCR read with Section 11 A of the Act, besides proposing to impose penalty under Rule 15(2) of CCR read with Section 11AC of the ACT. The adjudicating authority confirmed the demands proposed in the said SCN’s and imposed a penalty of 50% of the confirmed demand but dropped the levy of interest of Rs. 79,32,252/-on ineligible Cenvat Credit, for which reversals were subsequently made by the assessee. Hence, appeals were preferred before this forum by the assessee and the revenue.
Step by Step Guidance for Tax Audit & E-filing, Click Here
The counsel, Shri S. Muthuvenkataraman, representing the assessee, has reiterated the averments in the grounds of appeal and prayed for setting aside the impugned order as the demands confirmed and penalty imposed therein were not sustainable. The authorized representative, Shri M. Selvakumar, representing the Revenue, affirmed the findings of the Original Adjudicating Authority and submitted that the availment of Cenvat Credit on roadside assistance was not covered within the purview of definition of input service under Rule 2(l) of CCR as the service was utilised beyond the place of removal. It was pointed out that cost of service was included in the transaction value does not automatically mean inclusion of the service in the definition of ‘input service’.
It was submitted that credit availed on research activity could not be allowed as it cannot be said to be directly or indirectly connected to the manufacturing process and does not fall under the definition of input service. Regarding credit availed on service tax paid on demurrage charges, it was submitted that the CBIC had clarified vide Circular No. 121/2010-ST dated 26.04.2010 that detention charges were not liable for service tax and hence the assessee could not avail credit on service tax inadvertently charged by the Port authorities. It was pointed out that the Special Audit was conducted by the department from 30.04.2012 and reversals were made in the latter half of 2012 and hence the penalty imposed in the impugned order was legally justified.
The assessee has produced a Chartered Accountant’s Certificate dated 11.12.2024 issued by M/s. Vaidyanathan Meenakshi & Co. who has certified after detailed examination of the Cenvat credit accounts and related records that the assessee was always having enough Cenvat credit balance to cover the ineligible credits taken by mistake, thus proving that Cenvat credit was merely taken but not put to use.
The two-member bench of Vasa Seshagiri Rao, Member (Technical) and Ajayan T.V., Member (Judicial) modified the impugned Order-in-Original to the extent of demand of service tax of Rs.15,45,000/- taken on the service of Study on Investment, and the assessee is required to discharge the liability of wrong Cenvat credit availed. As the main demands, i.e., Cenvat credit on roadside assistance and also demand of interest on reversal of ineligible Cenvat credit, are not sustained, imposition of penalty is not called for as there is a genuine problem of interpretation of whether these services are eligible for credit or not and no intent to evade or suppression can be attributed to the conduct of the assessee. In the result, the appeal filed by the assessee is partly allowed with consequential relief, if any, as per the law and the appeal filed by the department is dismissed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
