By Puloma Dalal, Jayesh Gogri, Mandar telang Chartered Accountants
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CENVAT credit of service tax paid on management service with respect to honouring, rewarding and entertaining employees and exemployees is allowed.
Facts:
The appellants were manufacturers of motor vehicle parts and AC parts. They took CENVAT Credit in respect of housekeeping and dry cleaning service, event management service for annual function for honouring, rewarding and entertaining employees and ex-employees and legal service. The appellants contended that since CENVAT Credit in respect of taxies for carrying their employees for the event was allowed, CENVAT Credit of service tax in respect of event management service engaged for the same function should be allowed. The appellants relied on Endurance Technologies vs. C.C.E Aurangabad-2013 (32) S.T.R. 95 (Tri.-Mum.) wherein credit in respect of mandap keeper for the annual day function was allowed. Also, the appellants cited the case of Toyata Kirloskar Motor Ltd. vs. CCE, LTU, Bangalore 2011(24) S.T.R. 645 (Kar) where it was held that organising a function cannot be separated from the business of manufacture. The Adjudicating Authority held that these services were not eligible for CENVAT Credit as their products can be manufactured without these services. The Adjudicating Authority also held them guilty of suppression of facts and therefore, imposed penalty and interest.
Held:
Relying on various pronouncements cited by the appellants, it was held that denial of CENVAT credit for cleaning services, legal services and management service was not sustainable. Adjudicating authority erred in holding that mens rea was not an essential factor for imposition of penalty under Rule 15 of the CENAT Credit Rules, 2004 read with section 11AC of Central Excise Act, 1994. With respect to penalty under section 11AC of the Central Excise Act, 1944, suppression has to be brought out which involves mens rea. Since order-in-original did not bring out as to how the appellants were guilty of willful misstatement or suppression of facts, extended period of limitation was not justifiable and mandatory penalty could not be imposed.
