2011 (4) TMI 1073 - AT - Service Tax

Stay petition - CENVAT credit of service tax paid on input service - demanded with interest and penalty equivalent to the amount has been imposed on the appellant on the ground that the appellant had not paid 10% in terms of Rule 6 (3) (b) of CENVAT credit Rules as they have not maintained separate account in respect of input service used in the manufacture of exempted goods and dutiable goods - appellant submitted that the appellant had already reversed more than Rs. 2.15 Crores during the relevant period and submits that they had already paid much more than what was required by the department and the calculation made by the department is required to be reconsidered as the payment made by the appellant was not considered at all - stay petition is allowed and the appeal is remanded to the original adjudicating authority

Summary

Issues:
CENVAT credit on service tax paid for input services, non-maintenance of separate account for input services used in manufacturing exempted and dutiable goods.

Analysis:

1. CENVAT Credit on Input Services:
The appellant was demanded CENVAT credit of service tax paid on input services amounting to Rs.1,73,88,778, with interest and penalty imposed for not paying 10% as per Rule 6(3)(b) of CENVAT Credit Rules due to the absence of a separate account for input services used in manufacturing exempted and dutiable goods. The appellant argued that they had already reversed more than Rs. 2.15 Crores during the relevant period, exceeding the required payment. The Tribunal noted that the department did not consider the payments made by the appellant, as highlighted in the Commissioner (Appeals) order. The lack of comments or observations on the merits of the issue led the Tribunal to conclude that the matter needed to be remanded for a fresh decision by the adjudicating authority after considering all submissions and providing a reasonable opportunity for the appellant to present their case. The stay petition was allowed after the waiver of pre-deposit, and the appeal was remanded, keeping all issues open for further consideration.

2. Non-Maintenance of Separate Account:
The core issue revolved around the appellant's failure to maintain a separate account for input services used in the manufacture of exempted and dutiable goods, leading to the demand for CENVAT credit payment and the subsequent penalty. The appellant's argument regarding the substantial amount already reversed during the relevant period was a key point in their defense. The Tribunal emphasized the need for a thorough reconsideration of the calculation by the department, as the payments made by the appellant were not adequately acknowledged. The absence of comments or observations on the merits of the case in the order highlighted the necessity for a fresh decision by the adjudicating authority, with proper consideration of all issues and submissions. The Tribunal's decision to remand the case underscored the importance of a fair and comprehensive review of the appellant's contentions, ensuring a just outcome based on all relevant factors.