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2015 (7) TMI 1174 - AT - Service TaxCENVAT demand - GTA service - Commission Agent service - whether, the appellant is required to reverse the service tax credit, in the eventuality, where the inputs are removed as such from the factory? - Held that - Rule 3(5) of the Cenvat Credit Rules provides that when inputs or capital goods on which cenvat credit has been taken are removed as such from the factory, the manufacturer of the final product shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 9. On perusal of the said statutory provisions, it reveals that reversal of equal amount of cenvat credit is required in case of removal of inputs and capital goods and not with regard to credit taken on the input service - the demand confirmed in the present case by the Authorities below is not sustainable - appeal allowed - decided in favor of appellant.
Issues:
1. Whether the appellant is required to reverse the service tax credit when inputs are removed from the factory? Analysis: The appellant, engaged in manufacturing PVC pipes, availed cenvat credit for PVC raisins used in production and service tax paid on GTA and Commission Agent services. The dispute arose when the appellant removed PVC raisins from the factory, reversing cenvat credit for the inputs but not for the input services. The Department demanded service tax for the services not reversed. The Adjudication Order confirmed the demand, upheld by the Commissioner (Appeals), leading to the current appeal before the Tribunal. The key question was whether the appellant must reverse service tax credit when inputs are removed from the factory. Rule 3(5) of the Cenvat Credit Rules mandates paying an amount equal to the credit availed for inputs or capital goods removed from the factory. However, this rule does not explicitly require reversing credit for input services. As there are no provisions for reversing service tax credit on input services similar to those for inputs or capital goods, the Tribunal held that the demand for service tax credit on input services was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.
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