Customs, Excise and Service Tax Appellate Tribunal

Gujarat Insecticides Ltd. Vs. C.C.E. & S.T.-Vadodara-ii

MANU/CS/0068/2021

03.09.2021

Goods and Services Tax

Credit on Outdoor Catering Service to the extent of contribution of services charges borne by the employee is not Cenvatable

The issue involved in the present case is that whether the Appellant is liable to pay interest on the Cenvat credit availed on the contribution of service charges collected from employees in respect of Outdoor Catering Services and whether the Appellant is liable to penalty. The Appellant submits that, though the Appellant had availed the Cenvat credit under the bonafide belief but the same was not utilized and subsequently. He submits that, as per Rule 14 of Cenvat Credit Rules, 2004 the interest is chargeable when the credit has been taken or utilized or has been erroneously refunded.

The issue of availment of Cenvat credit on employees' contribution in respect of Outdoor Catering Services was debatable and the issue has been finally settled in the case of Ultra tech Cement Ltd by the Hon'ble Bombay High Court. Therefore, in this backdrop of the issue, the malafide intention cannot be attributed to the Appellant. Therefore, the penalty imposed by the Lower Authority is not sustainable hence, penalty is set aside.

As regard the levy of interest on availment of Cenvat credit, it has been settled that, the credit on Outdoor Catering Service to the extent of contribution of services charges borne by the employee is not Cenvatable. Therefore, the credit taken by the Appellant is wrongly taken credit. Therefore, in terms of Rule 14 of CCR, 2004, interest is chargeable. In the Rule, it is clearly provided that, whether the credit is taken or utilized the interest will be chargeable.

In the present case even if the credit was not utilized but taken wrongly therefore, the interest is chargeable from the date of taking credit till the date of reversal, if any made. However, the Rule 14 has been clearly interpreted by the Supreme Court and held that, since there is a word "OR" between credit taken and utilized and came to the conclusion that in both the situation the interest shall be chargeable and the "OR" cannot be read as" AND". In view of this Hon'ble Supreme Court judgment in the case of Ind Swift Laboratories Ltd., the issue is settled. The judgment of the Hon'ble Apex Court being binding on all the forums, in view of same, the appellant is liable to pay interest. Accordingly, the penalties imposed upon the appellants are set aside and demand of interest is maintained. Appeals are partly allowed.

Tags : Demand Interest Legality

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