2016 (3) TMI 855 - AT - Service Tax

Demand of Service tax at the rate of 6%/8% of the value of exempted goods - Rule 6(3)(i) of Cenvat Credit Rules 2004 - Held that - the appellant reversed the entire credit on the common input service along with interest following the option available under Rule 6(3)(ii) of the Cenvat Credit Rules. As per Sub-Rule (3A) of Rule 6(3) the Cenvat Credit required to be reversed is as per the formula prescribed. Here as the appellant have reversed the entire credit availed on common input service the demand of 6%/8% of the value of exempted goods is not sustainable. Also on reversal of Cenvat Credit attributed to the exempted services along with interest the demand is not sustainable. - Decided in favour of appellant with consequential relief

Summary

Issues Involved:
- Appeal against Order-in-Appeal rejecting appeal filed by appellant regarding Cenvat Credit availed on common input service.
- Interpretation of Rule 6(3) of Cenvat Credit Rules regarding options available for reversal of credit.
- Application of Rule 6(3)(i) and demand of 6%/8% of value of exempted service.
- Comparison of legal provisions pre and post 1.4.2008 based on relevant case laws.
- Consideration of judgments supporting appellant's case.
- Decision on sustainability of demand confirmed by adjudicating authority.

Analysis:

The appeal was filed against the Order-in-Appeal rejecting the appellant's appeal concerning the availment of Cenvat Credit on common input service. The appellant, a Co-operative Bank, was alleged to have availed Cenvat Credit on a common input service used in both taxable and exempted output services. The show cause notice proposed a demand based on Rule 6(3)(i) of Cenvat Credit Rules, 2004, at a rate of 6%/8% of the value of exempted service. The appellant contended that the adjudicating authority and the first appellate authority could not unilaterally decide the option to be exercised by the appellant under Rule 6(3). The appellant had paid the entire Cenvat Credit availed on common services along with interest, effectively nullifying the credit. The appellant argued that the demand was based on a judgment applicable to a period before 1.4.2008, whereas post that date, two options were provided under Rule 6(3). Several judgments were cited in support of the appellant's position.

The Revenue, represented by the Ld. Supdt. (A.R.), maintained that the appellant had not reversed the proportionate credit and therefore, the demand under Rule 6(3)(i) was correctly applied. However, the Member (J) analyzed the submissions and found that the appellant had reversed the entire credit on the common input service as per Rule 6(3)(ii). The Member highlighted the difference in legal provisions pre and post 1.4.2008, emphasizing the availability of two options post that date. The Member concluded that the demand confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) was not sustainable in light of the appellant's actions and the legal framework post 1.4.2008. The impugned order was set aside, and the appeal was allowed with any consequential relief, if applicable, in accordance with the law.

In summary, the judgment delved into the intricacies of Rule 6(3) of the Cenvat Credit Rules, analyzing the options available to the appellant and the application of demand under Rule 6(3)(i). The Member's decision rested on the interpretation of legal provisions pre and post 1.4.2008, supported by relevant case laws and judgments cited during the proceedings. The sustainability of the demand was carefully evaluated, ultimately leading to the setting aside of the impugned order and allowing the appeal in favor of the appellant.