2017 (9) TMI 1556 - AT - Service Tax

CENVAT credit - taxable services as well as non-taxable services - non-maintenance of separate set of books - Held that - reliance placed in the case of M/s. Aster Pvt. Ltd. Versus CC&CE, Hyderabad 2016 (6) TMI 866 - CESTAT HYDERABAD , where it was held that Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Maintenance of separate accounts for taxable and non-taxable/exempted services under Rule 6(1) of the Cenvat Credit Rules, 2004.
2. Reversal of Cenvat Credit for non-taxable/exempted services.
3. Interpretation of Rule 6(3A) regarding the procedure for payment under Clause (ii) of sub-rule (3).

Analysis:
1. The case involved the issue of the appellant not maintaining separate accounts for taxable and non-taxable/exempted services as required by Rule 6(1) of the Cenvat Credit Rules, 2004. Show Cause Notices were issued proposing demand due to this non-compliance. The Commissioner(Appeals) modified the Adjudication Order for recovery of specific amounts. However, the appellant contended that they had reversed the Cenvat Credit utilized for non-taxable/exempted services. The appellant provided evidence such as Trial Balance and invoices to support their claim, citing relevant legal decisions in their favor.

2. The appellant successfully argued that they had indeed reversed the amount of credit used in non-taxable services, as supported by their documentation. The Tribunal referred to the case of Aster Pvt.Ltd. where the interpretation of Rule 6(3A) was crucial. The Tribunal clarified that the requirement to intimate the department about the option exercised under Rule 6(3A) is procedural and does not automatically restrict the assessee's choice to avail the second option of reversing the proportionate credit. Therefore, the failure to intimate the department does not automatically enforce the payment under the first option of Rule 6(3)(i). The Tribunal emphasized that Rule 6(3A) is designed to facilitate the application of Rule 6(3) and not to eliminate the option available to the assessee. Consequently, the appeals filed by the appellant were allowed based on this interpretation.

3. The judgment by the Appellate Tribunal CESTAT KOLKATA, delivered by Shri P.K. Choudhary, Member(Judicial), resolved the issues related to the maintenance of separate accounts for taxable and non-taxable/exempted services, the reversal of Cenvat Credit for non-taxable/exempted services, and the interpretation of Rule 6(3A) regarding the payment procedure under Clause (ii) of sub-rule (3). The decision provided clarity on the procedural aspects of Rule 6(3A) and upheld the appellant's argument regarding the reversal of credit for non-taxable services, ultimately allowing the appeals.