2011 (3) TMI 488 - AT - Service Tax

Demand - utilized credit in excess of 20% of the tax paid every month - find that as per the appellant, major amount of demand working out to Rs.12.07 crores pertains to capital goods credit utilised - Note that the Commissioner wrongly found that the restriction contained in Rule 6(3) of CCR as regards the use of cenvat credit above 20% of the tax paid applied to credit of capital goods also - In the circumstances, set aside the impugned order and remand the entire case to the Commissioner for a fresh decision on all issues after hearing the assessee - The appeal is allowed by way of remand.

Summary

Issues:
1. Waiver of pre-deposit of demanded amount under Cenvat Credit Rules, 2004.
2. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004 regarding utilization of credit for capital goods.
3. Exigibility of charges for detailed billing, cancellation of SIM cards, and fancy numbers to service tax.
4. Bar of limitation for the demand.
5. Sustainability of demand on merits.

Analysis:
1. The judgment deals with an application filed by M/s. BSNL seeking a waiver of pre-deposit of Rs.12,13,90,286 demanded from them for utilizing cenvat credit in violation of Cenvat Credit Rules, 2004 to pay service tax. The demand also included penalties and interest under the Finance Act, 1994.

2. The main contention revolved around the interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004 regarding the utilization of credit for capital goods. The appellant argued that the restriction on credit utilization above 20% of tax paid applied only to inputs and input services, not capital goods. The Commissioner's error in applying this restriction to capital goods credit led to the remand of the case for fresh adjudication.

3. Another issue raised was the exigibility of charges for detailed billing, SIM card cancellations, and fancy numbers to service tax. The appellant contended that these charges were not subject to service tax as they did not constitute output services of BSNL. This argument was considered for further examination upon remand.

4. The question of the demand being barred by limitation was also raised. The Revenue argued that the demand was not time-barred as the returns filed by the assessee did not reflect the collection of certain charges. The Tribunal found it necessary to reevaluate this aspect during the fresh decision by the Commissioner.

5. Ultimately, the Tribunal allowed the appeal by way of remand, setting aside the impugned order. The case was remanded to the Commissioner for a fresh decision on all issues after hearing the assessee. The judgment highlighted the misapplication of the restriction on capital goods credit utilization and the need for a comprehensive review of the case on merits. The stay petition was also disposed of in light of the remand decision.