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Procam International Pvt. Ltd. Vs. Commissioner of Central Tax, Mumbai I (A) - (Customs, Excise and Service Tax Appellate Tribunal) (28 Sep 2018)

Onus lies on Department to justify admissibility or inadmissibility of Appellant's availment and utilisation of cenvat credit


Service Tax

In present matter, the Appellant company is engaged in rendering event management service, advertising service, sponsorship and business consultation service etc. and has obtained service tax registration for the same. During the EA-2000 audit conducted in 2015, it was noticed that during the financial years between 2010 and 2015, cenvat credit was availed by the Appellant company in respect of car hire charges, boarding and lodging expenses and car insurance charges to the tune of Rs. 29,62,185 out of which Appellant voluntarily reversed the credit availed against car hiring charges and car insurance charges and preferred not to contest the same. It has only questioned the legality, non-admissibility of input credit availed against boarding and lodging charges of Rs. 14,58,075. The order-in-original confirmed the entire tax liability and demand, interest as well as penalty of equivalent amount of Rs. 29,62,185 by invoking extended period and the same was confirmed by the Commissioner (Appeals).

The confirmation of the finding in the order-in-original on input credit availed against boarding and lodging charges paid by the Appellant-company as inadmissible credit thereby imposing tax liability along with interest and penalty, is the subject matter of present appeal.

Admittedly, Rule 9(5) and (6) and Rule 23 of the CESTAT Procedure Rules, have put the burden of proof regarding admissibility of cenvat credit on the provider of output service but before utilisation of cenvat credit accumulated in once account, there is no procedure available whereby an Appellant can take prior approval of availment of such credit from the competent authority. It is, therefore, equally true that, onus lies on the Department to justify that, Appellant's availment and utilisation of cenvat credit was admissible or inadmissible. Going by the negative list, it cannot be said that the Respondent department has discharged its duty with an affirmative opinion, may be by-passing the presumption that those services are used for personal consumption of the employees. In a indirect way, the purpose of audit is primarily to scrutinise the documents to arrive at the admissibility of cenvat credit and ascertain discharge of tax liability by a company, besides getting a firsthand information on tax evasion, non-payment etc.

In the instant case, the Appellant was noticed for availment of inadmissible credit on the ground that hotel accommodation was taken for personal use of its employees. This appears to be bald allegation without any verification or scrutinisation of purpose for which accommodation was taken in the hotel by the appellant company for its employees. Since, the nature of job of the Appellant was to provide event management service which can never remain confined to the place where appellant's registered office is situated, the same has to be at the place chosen by the service recipient. If the said place is situated at an outside location, then hotel accommodation could be considered as a basic requirement. However, scrutiny of bills and its admissibility as piece of evidence, though permissible under the law, could never be done at this end since the same would amount to mini-adjudication and not disposal of appeal.

Section 35A(3) empowers the Commissioner (Appeals) to make such further enquiry as may be necessary to pass such order as he may think proper and in view of the decision of the Hon'ble Supreme Court reported MIL India Ltd. vs. CCE, the Commissioner (Appeals) can exercise power vested with adjudicating authority in accepting evidence and making further enquiry as he deems proper after providing opportunity to the Appellant to establish and justify the nexus between the input and output services concerning admissibility of cenvat credit on tax paid for hotel and lodging accommodation. The order passed by the Commissioner (Appeals) is set aside. The matter is remanded back to him for fresh adjudication by the Commissioner (Appeals).


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