2018 (6) TMI 133 - AT - Service Tax

Reversal of Cenvat Credit - Cenvat Credit availed on inputs, capital goods and input services denial on the premises that services provided by the appellant during the impugned order are exempted from payment of service tax - Held that - Whatever service tax paid by the respondent amounts to reversal of Cenvat Credit availed by them on inputs, input service and capital goods. Therefore, the payment of service tax on the said services although not taxable shall be reversal of Cenvat Credit availed by the respondents on input, input service and capital goods - appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against denial of Cenvat Credit on services provided by the appellant due to exemption from service tax.

Analysis:
The Revenue appealed against an order denying Cenvat Credit on inputs, capital goods, and input services as the services provided by the appellant were considered exempt from service tax. The appellant had agreements for supplying electricity and chilled water, for which they availed Cenvat Credit. Despite paying service tax on these services, a show-cause notice was issued, claiming the appellant was not providing taxable services and thus not entitled to Cenvat Credit. The adjudicating authority ruled that although the appellant was not providing taxable services, the payment of service tax was accepted by the Revenue, leading to the reversal of Cenvat Credit availed by the appellant. The Revenue contended that the appellant should not be entitled to Cenvat Credit on inputs, input services, and capital goods. The Tribunal noted that the appellant's payment of service tax, even on non-taxable services, would result in the reversal of Cenvat Credit availed on inputs and services. Therefore, the Cenvat Credit availed by the appellant was restricted to the payment of service tax during the relevant period.

The Tribunal found no dispute regarding the facts of the case, with both parties acknowledging that the appellant was not providing taxable services but was paying service tax, which was accepted by the Revenue. The Revenue's argument that the appellant should not avail Cenvat Credit due to the non-taxable nature of the services provided was upheld. The Tribunal concluded that the payment of service tax by the appellant, even on non-taxable services, would lead to the reversal of Cenvat Credit on inputs, input services, and capital goods. As a result, the Tribunal dismissed the Revenue's appeals, finding no merit in their arguments.

In conclusion, the Tribunal upheld the decision to restrict the appellant's Cenvat Credit availed on inputs, input services, and capital goods to the payment of service tax made during the relevant period, despite the services provided being considered exempt from service tax. The Tribunal found no fault in the impugned orders and dismissed the Revenue's appeals accordingly.