2015 (11) TMI 617 - AT - Service Tax

Denial of 67% abatement claimed by it under Notification No. 15/2004-ST 19/2005-ST and 1/2006-ST - CENVAT Credit - Held that - In the case of Hello Minerals Water (2004 (7) TMI 98 - HIGH COURT OF JUDICATURE AT ALLAHABAD) it was held in the context of Notification No. 15/94-CE that the reversal of modvat credit amounted to non taking of credit inputs. The said judgment has been followed in the case of Amola Holdings (2009 (6) TMI 71 - CESTAT AHMEDABAD). As regards the judgment of Bombay High Court in the case of Dilip Chhabaria Designs (2015 (4) TMI 387 - BOMBAY HIGH COURT) it is to state that in that case the credit was taken on duty paid on chassis and other inputs which was not utilised since the same lapsed due to the assessee no longer remaining under the Excise net. Thus that judgment was dealing with rather different set of facts. We find that this issue has been analysed in detail by CESTAT in the case of Punj Lloyd 2015 (10) TMI 2294 - CESTAT NEW DELHI where also it has been held that the said ratio of the judgment of Allahabad High Court in the case of Hello Minerals (supra) continues to be applicable on the subject and the ratio stands confirmed by Supreme Court in the case of Sonalac Paints and Coatings Ltd. vs. CCE 2015 (4) TMI 697 - SUPREME COURT . - Impugned order is unsustainable - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to abatement under Notification No. 15/2004-ST, 19/2005-ST, and 1/2006-ST despite taking cenvat credit on input services.
2. Interpretation of judgments in Hello Minerals Water (P) Ltd. vs. Union of India, CST Ahmedabad vs. Amola Holdings Pvt. Ltd., and CCE-Mumbai-IV vs. Dilip Chhabaria Designs Pvt.
3. Applicability of the judgments in the context of the reversal of cenvat credit.
4. Analysis of the CESTAT judgment in the case of Punj Lloyd and its confirmation by the Supreme Court in Sonalac Paints and Coatings Ltd. vs. CCE.

Analysis:

1. The appeal was filed challenging the service tax demand of Rs. 92,27,535/- for the period 01.04.2006 to 30.04.2007, contending that the appellant was eligible for 67% abatement claimed under various notifications despite taking cenvat credit on input services. The appellant argued that it had reversed the proportionate cenvat credit and interest, citing judgments such as Hello Minerals Water (P) Ltd. vs. Union of India and CST, Ahmedabad vs. Amola Holdings Pvt. Ltd.

2. The Revenue's representative argued that once credit was taken, the appellant was not entitled to the abatement, irrespective of subsequent reversal. Reference was made to the judgment of the Bombay High Court in CCE-Mumbai-IV vs. Dilip Chhabaria Designs Pvt., supporting the Revenue's position on the matter.

3. The Tribunal analyzed the contentions of both sides, highlighting the relevance of the Hello Minerals Water judgment in the context of reversing modvat credit, which was considered as not taking credit on inputs. The Tribunal also mentioned the Amola Holdings case, following the principles established in Hello Minerals Water. Additionally, the Tribunal differentiated the facts of the Bombay High Court judgment in Dilip Chhabaria Designs, emphasizing that it dealt with a different scenario where the credit lapsed due to the assessee no longer being under the Excise net.

4. Referring to the CESTAT judgment in the case of Punj Lloyd and the Supreme Court's confirmation in Sonalac Paints and Coatings Ltd. vs. CCE, the Tribunal concluded that the impugned demand for service tax was unsustainable. Consequently, the Tribunal set aside the order-in-original and allowed the appeal in favor of the appellant based on the detailed analysis provided, aligning with the principles established in the relevant legal precedents.