By TIOL News Service

MUMBAI, DEC 18, 2018: A plot in MIDC consisting of a total area of 33,000 sq. ft. was leased out to the Appellant.

Substantial portion of the premises (30,990 sq. ft.) was used as a factory and only a small portion (2,009 sq. ft.) was used as depot. Ratio wise, the area of the said plot for use as factory and depot is 93.91%: 6.09%.

A SCN dated 21.05.2015 was issued to the Appellant for recovery of Rs.11,00,877/- which was availed by the Appellant as CENVAT Credit (Period April, 2011 to October, 2013). Out of the said amount Rs.10,38,070/- pertains to credit on Renting of Immovable property whereas remaining amount of Rs.62,806/- pertains to CENVAT Credit on Manpower Supply, Chartered Accountant Service, Repair & Maintenance and GTA service.

The Additional Commissioner disallowed the Credit of Rs.11,00,877/- and imposed penalty and interest.

On Appeal, the Commissioner (Appeals) modified the Order-in-Original and reduced the disallowance to Rs.8,95,339/-.

Before the CESTAT, the Appellants are contesting only the dis-allowance of CENVAT credit by the Commissioner (Appeals) on renting of immovable property and have specifically mentioned that they don't have any objection about the disallowance of CENVAT Credit on other input services.

It is further submitted that although in Para 7.1 of the impugned order, the Commissioner (A) had specifically admitted that there is sufficient force in the contention of the appellant that out of the total area only 6.09% area was used for depot and, therefore, out of the total credit of Rs.10,38,070/- only Rs.63,219/- (i.e. 6.09%) is ineligible, however, while computing the amount to be disallowed, the aforesaid observation was not taken cognizance of. The appellant also pleaded that since the details regarding the availment of CENVAT Credit on input services were recorded in the statutory records and shown in the monthly returns they are not liable to pay equal penalty and that as per the proviso of Section 11AC (1)(C) of CEA, 1944, as it stood during the period in dispute, they are liable to pay only 50% penalty.

The Bench extracted the said findings and inter alia observed -

++ It is not the case of Revenue at any point of time that the entire premises has been used for trading activity or for depot purpose only.

++ Once the Commissioner has accepted the contention of the appellant that only the amount of Rs.63,219/- out of the disputed credit amount of Rs.10,38,070/- is required to be disallowed for the renting of immovable property service, then there was no need to go into the ratio of trading activity towards manufacturing turnover.

++ Therefore, since the Appellant has availed a total amount of Rs.10,38,070/- as input service tax credit for this renting of immovable property service, therefore 6.09% of the said amount i.e. Rs.63,219/- is only ineligible for credit since that was used for trading activity and not for the manufacturing purpose.

In fine, the matter was remanded for correct quantification of the demand amount and also interest. The penalty was also held to be quantifiable as fifty percent of the revised demand amount.

The appeal was disposed of.

(See 2018-TIOL-3792-CESTAT-MUM)