2018 (3) TMI 106 - AT - Service Tax

CENVAT credit - common input services used for providing both the category of services - Rule 6(3) of the CCR 2004 - Held that - upon appreciation of the records maintained by the appellant, the adjudicating authority has dropped the SCN and also confirmed /appropriated the amount which was subsequently paid by the appellant. Thus, the original order passed upon appreciation of facts on record cannot be ignored to arrive at the conclusion that the appellant did not maintain separate accounts in terms of Rule 6(3A) of the rules. Since the Commissioner (Appeals) has not properly gone through the submissions of the appellant and did not scrutinise the documents submitted by the appellant in their proper prospective, the demand confirmed on the appellant in the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of wrongly availed Cenvat credit under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The appellant, engaged in providing advertising agency services, availed Cenvat credit of service tax on input services. The Service Tax department alleged contravention of Rule 6(3) of the Cenvat Credit Rules, 2004, and issued a show cause notice for recovery. The adjudicating authority dropped a major part of the demand but confirmed a smaller amount. The department appealed to the Commissioner (Appeals), who upheld a demand of ?7,52,873 against the appellant.

The appellant argued that they maintained separate records for common input services used for taxable and exempted services as per Rule 6(3A) of the Rules. They presented invoices and documents showing the reversal of proportionate Cenvat credit for common input services. However, the Commissioner (Appeals) did not consider these documents while passing the order.

Upon review, the Tribunal found that the appellant had followed the rules by maintaining separate records for common input services. The adjudicating authority had dropped the show cause notice after examining the records and confirmed/appropriated the amount already paid by the appellant. The Tribunal noted that the Commissioner (Appeals) did not properly assess the appellant's submissions and documents, leading to an incorrect confirmation of demand.

Consequently, the Tribunal concluded that the demand confirmed by the Commissioner (Appeals) could not be sustained due to the failure to consider the appellant's compliance with Rule 6(3A) and the proper scrutiny of submitted documents. The Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.