The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has granted Delhi Metro Rail Corporation a cenvat credit for consult.
The appellant-Delhi Metro Rail Corporation (DMRC)is engaged in providing service of transport to commuters/passengers in Delhi since 24.12.2002 which service is not liable to service tax. The appellant is providing among others service of consulting engineers service to other metro railway bodies in cities like Bangalore, Hyderabad, Chennai, Mumbai, Pune etc. due to their experience and knowledge.
On Audit it was found that the appellant have wrongly availed Cenvat credit of Service Tax of Rs. 6,17,84,781/- paid on input service-consulting engineering service from April 2004 to August 2007, as the appellant was providing exempt service of Transport of passengers.
The revenue was of the view that as per Rule 6(1) of CCR, 2004 assessee is not entitled to take Cenvat credit for input service used for rendering exempted output service. Further Rule 6(2) provides for maintaining separate accounts for input services to be used for rendering taxable output service and tax-free services, further Rule 6(5) provides that notwithstanding anything contained in sub-rule 1, 2 & 3.
The SCN was adjudicated by the principal Commr. of service tax and confirmed the demand of Rs. 6,17,84,781/- holdingthat the Cenvat credit of consultancy engineering service is inadmissible.
Out of the proposed demand, for irregular invoices of Rs. 66,17,317/-, the truncated amount of Rs. 5,22,936/- was confirmed as inadmissible, received during the period 2006-2009. Further, an equal amount of penalty Rs. 6,23,07,717/- was imposed under Section 78. Penalty under Section 76 was dropped and the demand of Rs. 60,94,381/- was also dropped.
Further urges that Rule 9(1) and 9(2) of CCR specifies documents required for availing Cenvat credit. The consulting engineering service received by them was meant for phase-I or phase II of Delhi Metro. Thus, there is no correlationbetween the input consultancy engineering service received by the appellant with the output consultancy service rendered to others.
A coram comprising Mr Anil Choudhary, Member (Judicial) and Mr P V Subba Rao, Member (Technical) observed that the appellant has provided taxable output service of engineering consultancy service to other metro projects located in other cities like Hyderabad, Chennai, Pune, Kolkata etc.
It was held that the input credit on a consulting engineerās service was 100% allowable under Rule 6(5) read with Rule 2(l) of the Cenvat Credit Rule (CCR). Rule 2(l) of CCR provides āinput service means any service used by a provider of output service for providing output service. This rule further provides that such input service may have been used by the manufacturer/service provider either directly or indirectly.
Further viewed that āonce credit has been rightly taken, there is no restriction in the use of such credit for payment of either central excise duty or service tax or any other specified tax liability.ā The Tribunal set aside the demand of disallowance of Cenvat credit of Rs. 6,17,84,781/-.
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