2017 (12) TMI 902 - AT - Service Tax

CENVAT credit - input services used to provide taxable as well as exempt services - non-maintenance of separate records - Held that - in view of the provisions of sub-rule (5) of Rule 6 of the rules the appellant will be entitled for the Cenvat credit on such input services, irrespective of the fact that such services were used for providing both taxable as well as exempted services - the authorities below have not specifically observed with regard to the nature of services used/utilised by the appellant for providing both categories of services - the matter should go back to the original authority for verification of the specific services which were used by the appellant for providing both category of services - appeal allowed by way of remand.

Summary

Issues:
1. Interpretation of Rule 6 of the Cenvat Credit Rules, 2004 regarding maintenance of separate records for taxable and exempted services.
2. Applicability of sub-rule (5) of Rule 6 in determining Cenvat credit entitlement for services used for both taxable and exempted categories.

Analysis:
Issue 1:
The case involved a dispute where the appellant, registered for providing taxable services, was accused of not maintaining separate accounts for exempted services provided to UNICEF, leading to an alleged misuse of Cenvat credit. The department sought to recover an amount from the appellant based on this non-compliance with Rule 6 of the Cenvat Credit Rules, 2004. The original order confirming the demand was challenged in the impugned order dated 25.2.2011 passed by the Commissioner (Appeals), Central Excise & Service Tax, Delhi.

Issue 2:
The appellant contended that they were entitled to Cenvat credit under sub-rule (5) of Rule 6 for services used for both taxable and exempted categories. The appellant's representative argued that certain services like maintenance or repair service, management consultancy service, and security agency service fell under Rule 6(5) for availing the entire Cenvat credit. However, the authorities had not specifically determined the nature of services used by the appellant for both categories. The tribunal, in its judgment, highlighted the importance of verifying the specific services used by the appellant and directed the matter to be remanded to the original authority for a fresh decision considering the provisions of sub-rule (5) of Rule 6.

In conclusion, the tribunal set aside the impugned order and remanded the case to the original authority for a reevaluation of the services used by the appellant for providing both taxable and exempted services. The tribunal emphasized the need for a thorough examination to determine the applicability of sub-rule (5) of Rule 6 in granting Cenvat credit to the appellant. The appellant was granted a personal hearing opportunity before the fresh decision by the original authority.