2009 (4) TMI 119 - AT - Service Tax

Construction Service Cenvat Credit - Abatement of 67% - notification no. 18/2005 dated 7-6-2005 and notification no. 1/2006 dated 1-3-2006 - There is no dispute that the service was provided prior to amendment arid by the time payment was received and tax liability arose, the Notification had been rescinded. benefit of cenvat credit allowed

Summary

Issues:
Interpretation of Notification No. 01/2006-ST dated 01.3.2006 in relation to availment of cenvat credit and abatement for construction services rendered before and after the rescinding of Notification No.18/2005-ST dated 07.6.2005.

Analysis:
The case involved a dispute regarding the availment of cenvat credit and abatement for construction services provided by the appellants. The appellants had availed cenvat credit under Cenvat Credit Rules 2004 and simultaneously claimed abatement of 67% as per Notification No.18/2005-ST. The demand was raised against the appellant on the grounds that cenvat credit was not available after the rescinding of Notification No.18/2005-ST and the issuance of Notification No. 01/2006-ST. The Revenue argued that service tax should have been paid based on the Notification in existence at the time of payment, i.e., Notification No. 01/2006-ST dated 01.3.2006.

The consultant for the appellants contended that the taxable event, which is the rendering of services, occurred before the issuance of Notification No. 01/2006-ST. Therefore, the appellants were eligible for both abatement and cenvat credit for the services provided before the new notification came into effect. The consultant also cited relevant decisions supporting the proportionate collection of tax for services rendered before and after the imposition of service tax.

After considering the arguments from both sides, the Member (Technical) analyzed that the taxable event of providing services had taken place before the new notification was issued. Therefore, the appellants were entitled to avail both abatement and cenvat credit for the services provided before the new notification. The Member referred to a specific case law where the Tribunal had ruled that the taxable event occurred when the contract was entered into, similar to the situation in this case. Consequently, the appeal was allowed in favor of the appellants, granting them the benefit of Notification No.18/2005 for the services provided before the new notification came into force.