2018 (12) TMI 1803 - AT - Service Tax

CENVAT Credit - Cenvat credit attributable to the exempted service has been reversed - liability on the part of appellant to pay 6%/8%, in terms of Rule 6(3) of Cenvat Credit Rules, 2004 - HELD THAT - Considering the submissions of the ld. Counsel that the entire Cenvat credit attributable to the exempted service has been reversed, the demand under Rule 6(3) i.e. 6%/8% of the value of exempted service will prima facie not survive - However, the calculation of Cenvat credit attributable to exempted service has not been verified by the lower authorities. As per the submission of the ld. Counsel, reversal was shown in the periodical returns filed with the department which has not been seen by the department as the same was not submitted at the time of adjudication. The matter should go back to the Adjudicating Authority to verify the quantum of Cenvat credit attributable to the exempted service and reversal thereof - appeal allowed by way of remand.

Summary

Issues:
Whether the appellant is liable to pay 6%/8% under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The appellant, represented by Shri Jigar Shah, argued that they had reversed a significant portion of the Cenvat credit upon audit findings, specifically the credit related to exempted services. Citing a previous tribunal judgment, the appellant contended that the demand under Rule 6(3) for 6%/8% would not be justified due to the reversal of credit. On the other hand, Shri Sameer Chitkara, representing the Revenue, maintained that since the appellant had initially taken the credit upon service receipt, they were still liable for the 6%/8% payment as per Rule 6(3). The Revenue also emphasized the violation of Rule 6(3) and sought penalty under Rule 15 of the Cenvat Credit Rules, 2004.

Upon careful consideration of both arguments and the records, the tribunal focused on determining whether the appellant should pay 6% or 8% of the exempted service value under Rule 6(3). While acknowledging the reversal of Cenvat credit related to exempted services claimed by the appellant, the tribunal noted that the lower authorities had not verified the calculation of credit reversal. The tribunal highlighted that the reversal was reflected in periodic returns not submitted during adjudication. Consequently, the tribunal decided to remand the matter to the Adjudicating Authority to assess the quantum of Cenvat credit linked to exempted services and its reversal. The tribunal also emphasized the appellant's liability for interest on the reversed Cenvat credit from the initial credit claim until the reversal date.

In conclusion, the tribunal set aside the impugned order and directed a fresh assessment by the Adjudicating Authority to determine the Cenvat credit attributable to exempted services and the consequent reversal, emphasizing the appellant's obligation to pay interest on the reversed amount.