2018 (12) TMI 857 - AT - Service Tax

Utilization of CENVAT Credit - reverse charge mechanism - Management Consultancy Service provided from outside India and received by them in India - Rule 6(5) of the Cenvat Credit Rules 2004 - Board s Circular on Service Tax being F.No.137/203/2007-CX-4 dated 01.10.2007. Held that - The utilization of credit availed under Rule 6(5) of the Rules shall be allowed in full unless used exclusively for providing exempted services. Further in cases where the assessee is providing both exempted and taxable output services there is no restrictions provided by Rule 6(5) of the Cenvat Credit Rules 2004 for utilization of such credit. The issue is no more res-integra as has been observed in the Tribunal s decision in the case of CCE vs. V.M. Salgaonkar & Bros. Pvt. Ltd. 2008 (2) TMI 90 - CESTAT MUMBAI where it was held that it is undisputed that credit availed is on the service as mentioned in Rule 6(5) the credit of the entire/whole amount of service tax has to be allowed. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Whether the demand of Service Tax and Education Cess raised against the respondent assessee is legal and proper.
2. Whether the matter should be remanded to the original authority for fresh adjudication.
3. Any other order deemed fit by the Hon'ble CESTAT.

Analysis:
1. The case involved a dispute regarding the availment of Cenvat credit towards the payment of service tax under reverse charge mechanism by the respondent assessee. The Revenue challenged the dropping of the demand for Service Tax and Education Cess by the Adjudicating Authority. The Revenue contended that the demand was valid under Rule 6(3)(c) of the Cenvat Credit Rules, 2004. The respondent argued that the classification adopted was correct, and the Adjudicating Authority had examined all aspects of taxability. The respondent maintained that there was no short payment of service tax and that the department failed to challenge the part of the order allowing credit under reverse charge mechanism.

2. The Tribunal examined the utilization of Cenvat Credit under Rule 6(5) of the Cenvat Credit Rules, 2004. The respondent argued that Rule 6(5) allowed full credit utilization without restrictions when services were used for both exempted and taxable services. The Tribunal noted that the Board's Circular supported the respondent's contention. The Tribunal referred to the Circular dated 01.10.2007, which clarified that credit taken on specified services could be utilized for service tax payment without any limit if used for taxable services. The Tribunal observed that Rule 6(5) did not impose restrictions on credit utilization in cases where both exempted and taxable services were provided.

3. The Tribunal relied on precedent, specifically the case of CCE vs. V.M. Salgaonkar & Bros. Pvt. Ltd., to support its decision. The Tribunal highlighted that Rule 6(5) contained a non-obstante clause, indicating that its provisions overrode those of Rule 6(3). The Tribunal emphasized that if the service tax credit availed pertained to services listed under Rule 6(5), the entire amount of service tax credit had to be allowed. The Tribunal dismissed the Revenue's appeal, concluding that there was no justification to interfere with the impugned order, thereby upholding the decision of the Adjudicating Authority.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind its decision, addressing the legal nuances and precedents cited during the proceedings.