2014 (12) TMI 824 - AT - Service Tax

CENVAT Credit - Export of services or exempted services during the relevant period - Whether the Cenvat credit is required to be utilized up to 20% under Rule 6(3)(ii) of Cenvat Credit Rules, 2004 when the appellant is providing services both under the categories of exempted and taxable services - Held that - Cenvat credit is required to be restricted only up to 20% of the credit taken by the appellant. Only dispute is whether C.B.E. & C. circular will have retrospective effect or not. Vide C.B.E. & C. Circular dated 9-5-2008, it has been clarified that export of services without payment of Service Tax should not be treated as an exempted services and accordingly, full credit would be admissible to the appellant. However, first appellate authority has held that circular issued on 9-5-2008 will have only prospective effect. In this regard, Hon ble Supreme Court in the case of M/s. Suchitra Components Ltd. v. CCE, Guntur (2007 (1) TMI 4 - SUPREME COURT OF INDIA) has held that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospective. In view of the above law laid down by Supreme Court, it has to be held that the Circular dated 9-5-2008 will be applicable to the past period also, and appellant was rightly entitled to the Cenvat credit - Decided in favour of assessee.

Summary

Issues:
Whether Cenvat credit is required to be utilized up to 20% under Rule 6(3)(ii) of Cenvat Credit Rules, 2004 when the appellant is providing both exempted and taxable services.

Analysis:
The appellant appealed against Order-in-Appeal No. PJ/608/VDR-II/2012-13, dated 25-3-2013, questioning the utilization of Cenvat credit under Rule 6(3)(ii) of Cenvat Credit Rules, 2004. The appellant contended that their services included exports without payment of Service Tax, which should not be considered exempted services as per C.B.E. & C. Circular No. 868/6/2008-CX. The appellant relied on the judgment in the case of Suchitra Components Ltd. v. CCE, Guntur to support their argument for retrospective application of the circular.

The Revenue, represented by Shri K.J. Kinariwala, defended the orders passed by the first appellate authority, maintaining that the circular should have prospective effect. After hearing both sides and examining the case records, the Tribunal acknowledged that the C.B.E. & C. Circular dated 9-5-2008 clarified that export of services without Service Tax payment should not be treated as exempted services, entitling the appellant to full credit. The Tribunal referred to the principle established by the Hon'ble Supreme Court in Suchitra Components Ltd. v. CCE, Guntur, stating that beneficial circulars should be applied retrospectively. Consequently, the Tribunal held that the Circular dated 9-5-2008 should be applicable to the past period, allowing the appellant's entitlement to Cenvat credit.

In light of the above legal principles and interpretations, the Tribunal granted the appellant's appeal, emphasizing the retrospective application of the beneficial circular. The stay application was allowed, and the appeal was disposed of in favor of the appellant, confirming their right to the Cenvat credit for the relevant period.