2018 (6) TMI 710 - AT - Service Tax

Abatement in terms of Notification No.1/2006 - Tour operator service - delay in reversal of credit - interest not paid - whether the appellant is eligible for the abatement under Notification No.1/2006 when they have reversed the credit and has not paid the interest for the delayed reversal of credit? - Held that - The Hon ble jurisdictional High Court in the case of Stretegic Engineering P. Ltd. 2014 (11) TMI 89 - MADRAS HIGH COURT has held that no interest is liable to be paid when the credit is reversed before utilization - the disallowance of abatement under the Notification is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Eligibility for abatement under Notification No.1/2006
- Liability to pay interest on reversed credit

Analysis:
1. Eligibility for abatement under Notification No.1/2006:
The case involved the appellant, engaged in providing various services with centralized registration for multiple branches, availing abatement benefit under Notification No.1/2006. The appellant had initially availed CENVAT credit on certain input services but later reversed the credit before utilization. The issue was whether the appellant was eligible for abatement when the credit was reversed without paying interest. The appellant argued that the reversal of credit amounted to non-availment and made reference to relevant case laws supporting their stance. The appellate tribunal considered the appellant's actions in line with previous judgments and concluded that the appellant was indeed eligible for the abatement benefit. The tribunal relied on precedents like CCE Vs. Sanjay Engineering Industries and Punj Lloyd Ltd. to support their decision.

2. Liability to pay interest on reversed credit:
Another aspect of the case was the liability of the appellant to pay interest on the credit that was reversed before utilization. The appellant contended that since the credit was reversed promptly, there was no obligation to pay interest. The tribunal examined case laws like CCE Vs. Stretegic Engineering P. Ltd. and Rashtriya Ispat Nigam Ltd. to determine the liability for interest on reversed credit. Based on these precedents, the tribunal held that when the credit is reversed before utilization, no interest is payable. The tribunal, following the decisions in relevant cases, concluded that the appellant was not liable to pay interest on the reversed credit and therefore, was eligible for the abatement under Notification No.1/2006.

In the final judgment, the tribunal set aside the impugned order, allowing the appeals with consequential relief if any. The decision was based on the appellant's compliance with the conditions of Notification No.1/2006 by reversing the credit and the absence of liability to pay interest on the reversed credit. The analysis of the issues involved in the case provided clarity on the eligibility criteria for abatement benefits and the obligation to pay interest on reversed credits, establishing a legal precedent for similar cases in the future.