APPEAL NO. ST/205 2006

JULY 6, 2007

Rule 4 of the Cenvat Credit Rules, 2004, read with sections 76 and 80 of the Finance Act, 1994 - Conditions for allowing Cenvat credit - Assessee, a cellular phone services provider, availed input services of an internet operator - It availed credit of service tax paid by input service provider and utilized same for payment of service tax for its output services - Revenue denied credit of input service to assessee on ground that ‘input service’ and ‘output service’ of assessee fell under different categories - Revenue also imposed penalty upon assessee - Whether revenue was justified in denying credit to assessee - Held, yes - Whether since assessee was under a bona fide belief that it would be entitled for credit, imposition of penalty equal to credit was rather harsh and, therefore, penalty was to be set aside - Held, yes [Para 4]