2015 (7) TMI 713 - AT - Service Tax

Availability of Cenvat credit of Service Tax - various services used for providing the sale of their final product - Held that - Appeal can be disposed of on the point of limitation itself inasmuch as the show cause notice was issued on 9-5-2007 for the period December, 2003 to March, 2006. Considering the fact that Additional Commissioner has himself interpreted the provisions of Rule 6(3)(c), in favour of the assessee is indicative of the fact that said provisions are capable of two interpretations. When one of senior officer of the department is dropping the demand by adopting a particular interpretation of provision of law, the assessee cannot be held guilty of adopting the same interpretation which is in his favour and availing the credit. In the absence of any other evidence to show that the appellant have availed the full credit with mala fide intention so as to justify the invokation of longer limitation period, we hold in favour of the appellant - Decided in favour of assessee.

Summary

Issues: Availability of Cenvat credit of Service Tax for services provided during and after warranty period. Interpretation of Rule 6(3)(c) of Cenvat Credit Rules, 2004.

The judgment in question revolves around the availability of Cenvat credit of Service Tax for services utilized during the sale of final products, warranty period, and post-warranty period. The appellant, engaged in selling washing machines, dryers, microwave machines, and dishwashers, also provides free warranty and subsequent maintenance and repair services. The dispute arises from the Revenue's contention that the appellant is not entitled to full credit of Service Tax paid on common services due to the distinction between exempt services during the warranty period and taxable services post-warranty. The Revenue relied on Rule 6(3) to limit the credit to 20% of the total amount utilized.

The proceedings were initiated against the appellant for the period from December 2003 to March 2006 through a show cause notice issued on 9th May 2007, invoking the longer period of limitation. The Additional Commissioner initially ruled in favor of the appellant, stating that the 20% restriction under Rule 6(3)(c) does not apply to services during the sale or post-warranty period since they are neither exempt nor taxable. Consequently, the proceedings in the show cause notice were dropped by the Additional Commissioner.

However, the Commissioner reviewed the decision and upheld a demand of &8377; 11,18,309/- along with an equal penalty. The appellate tribunal, consisting of Ms. Archana Wadhwa and Shri Rakesh Kumar, found that the appeal could be disposed of based on the limitation issue alone. Given the conflicting interpretations of Rule 6(3)(c) by senior departmental officers, the tribunal ruled in favor of the appellant. The tribunal concluded that in the absence of evidence showing mala fide intention by the appellant, the longer limitation period could not be invoked. Therefore, the appeal succeeded solely on this ground, and the tribunal ruled in favor of the appellant.