2014 (8) TMI 472 - AT - Service Tax

Denial of small service exemption since cenvat credit was availed - Denial of refund claim of service tax paid wrongly while availing SSP exemption - Value of taxable services was below the monetary limit of 4 lakhs - Held that - Impugned order has been passed by the Commissioner (Appeals) relying upon the decision of the Apex Court in the case of Shri Hari Chemical Exports Ltd. (2005 (12) TMI 95 - SUPREME COURT OF INDIA) wherein the Apex Court has held that only because in his books of accounts entries are made for taking of the credit in terms of one provision of the Rules the same if ultimately found to be inapplicable and return of the credit is taken effect we are of the opinion that there cannot be any legal bar in claiming the exemption under another rule. In this case admittedly the respondents have taken credit on telephone service but have not utilized the credit available for payment of service tax on telephone service and they have reversed the credit balance so they are entitled to claim for the benefit of exemption Notification No. 6/2005-S.T. dated 1-3-2005 - decided against Revenue.

Summary

Issues:
1. Appeal against the adjudication order demanding service tax, interest, and penalty.
2. Eligibility for exemption under Notification No. 6/2005-S.T. for service tax paid on telephone service.

Analysis:
1. The appeal was filed by the Revenue against an order setting aside the adjudication order demanding service tax, interest, and penalty. The respondents, registered under service tax as consignment and sales agents, filed a refund claim below the monetary limit of Rs. 4 lakhs for the period 2005-06. However, it was discovered that they had availed Cenvat credit on service tax paid on telephone services, making them ineligible for the exemption. The Commissioner (Appeals) allowed the refund claim based on a Supreme Court decision. The Revenue contended that availing credit on telephone service made the respondents ineligible for the exemption.

2. The Tribunal noted that the respondents had taken credit on telephone service but had not utilized it for paying service tax on telephone services, reversing the credit balance. Citing the Supreme Court decision, the Tribunal held that there was no legal impediment to claiming the exemption under another rule if the credit was ultimately found to be inapplicable. As the respondents had not utilized the credit for payment and had reversed the balance, they were deemed eligible for the benefit of exemption under Notification No. 6/2005-S.T. Therefore, the impugned order was upheld, and the Revenue's appeal was dismissed.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the reasoning behind the Tribunal's decision, emphasizing the legal principles and precedents applied in reaching the final conclusion.