2018 (4) TMI 1330 - AT - Service Tax

CENVAT credit - recovery of an amount of 8% of the value of exempted/ non-taxable services - appellant provided taxable as well as exempt services - non-maintenance of separate records - Rule 6 of the CCR 2004 - Held that - the appellant had already reversed the CENVAT credit and also paid interest on such reversal - Since on the date of passing of the impugned orders there were no outstanding liability recoverable from the appellants the demand of amount in terms of Rule 6(3) of the rules cannot be sustained. Taking of irregular CENVAT credit and subsequent reversal thereof has not been specifically mentioned either by the appellants in the periodic returns or discussed by the authorities below in the show cause notice /impugned order - for ascertaining the reversal of credit as asserted by the appellants the matter should go back to the original authority. Appeal allowed by way of remand.

Summary

Issues involved:
Interpretation of Rule 6 of CENVAT Credit Rules, 2004 regarding payment of service tax on exempted services provided by the appellant.

Analysis:
The issue in all the appeals pertains to the interpretation of Rule 6 of the CENVAT Credit Rules, 2004 concerning the payment of service tax on exempted services provided by the appellant. The appellants, engaged in providing banking and financial services, also offer cash credit facilities to customers, earning interest exempted from service tax. The Department alleged non-compliance with Rule 6, initiating proceedings for recovery of 8% of the value of exempted services. The appellants argued that they had reversed CENVAT credit and paid interest on certain services exempted under Rule 6(5). The Revenue contended that lack of specific mention and inadequate record-keeping justified confirming the demand.

Upon reviewing the impugned orders, the Tribunal found that although the appellants had reversed the CENVAT credit and paid interest, such actions did not absolve them from service tax liability. However, citing precedents, the Tribunal held that once an assessee reverses CENVAT credit, the demand for recovery of exempted service value cannot be upheld. As there was no outstanding liability on the appellants at the time of the impugned orders, the demand under Rule 6(3) was deemed unsustainable. Notably, the Tribunal referred to a previous case to support its decision.

Further scrutiny of the case records revealed that the irregular CENVAT credit and its reversal were not adequately addressed by the appellants or the authorities in the show cause notice and impugned order. Consequently, the matter was remanded to the original authority for verification of the reversal particulars provided by the appellants. The Tribunal emphasized affording the appellants a personal hearing before reconsidering the issue.

In conclusion, all appeals were allowed by way of remand, with the impugned orders set aside for the original authority to review the reversal particulars and provide the appellants with a fair opportunity for a personal hearing.