2014 (8) TMI 297 - AT - Service Tax

Availing cevnat credit while availing benefit of abatement - Denial of benefit of Notification No. 1/2006-ST dated 1.3.2006 - Held that - As per the condition of the Notification, the benefit of the Notification is not available in case where cenvat credit of duty paid on input services is availed. In view of this, the impugned order is rightly passed - As now the appellant has reversed the credit of service tax paid on the common inputs services with interest, therefore the matter is to be re-examined by the adjudicating authority afresh - Decided in favour of assessee.

Summary

Issues:
1. Waiver of pre-deposit of service tax, interest, and penalties based on Notification NO. 1/2006-ST dated 1.3.2006.
2. Availing credit of service tax on common input services contrary to the provisions of the Notification.
3. Reversal of credit of service tax on common input services and entitlement to benefit under Notification 1/2006-ST dated 1.3.2006.
4. Interpretation of conditions under the Notification regarding availing cenvat credit of duty paid on input services.
5. Reversal of credit leading to waiver of pre-deposit for hearing of the appeal.
6. Effect of reversing credit on common input services on the applicability of the Notification and the need for re-examination by the adjudicating authority.

Analysis:
1. The applicant sought waiver of pre-deposit of service tax, interest, and penalties, contending that they reversed the credit of service tax availed on common input services and are now eligible for the benefit under Notification NO. 1/2006-ST dated 1.3.2006. The Revenue argued that the applicant had availed the credit on common inputs while benefiting from the Notification, which is not permissible under the conditions. The Tribunal noted the reversal of credit with interest and granted waiver of pre-deposit for the appeal hearing.

2. The crux of the issue lies in the interpretation of the Notification's conditions regarding availing cenvat credit of duty paid on input services. The Tribunal considered the applicant's reversal of the credit on common input services as a significant factor in determining the eligibility for the Notification's benefit. The Revenue's reliance on the lower authority's findings was countered by the applicant's actions of reversing the credit, leading to the Tribunal's decision to waive the pre-deposit for the appeal.

3. The Tribunal referred to a decision by the Hon'ble Allahabad High Court in a similar case, emphasizing that the reversal of credit amounts to non-taking of credit on the inputs. This legal precedent supported the Tribunal's decision to set aside the impugned order and remand the matter to the adjudicating authority for fresh examination. The Tribunal's ruling focused on the impact of reversing the credit on common input services on the re-evaluation of the case by the adjudicating authority.

4. Ultimately, the Tribunal's decision highlighted the significance of the applicant's action in reversing the credit of service tax on common input services with interest, leading to the conclusion that the matter required re-examination by the adjudicating authority. The Tribunal's decision to remand the case for de novo adjudication underscored the importance of compliance with the conditions under the Notification and the impact of reversing credit on the overall assessment of the case.