2020 (1) TMI 5 - AT - Service Tax

Rectification of mistake - case of appellant is that since the order dated 03.05.2019 fails to consider the alternative submission made in the order and error has occurred in the order which needs to be rectified - HELD THAT - The appellant had raised this alternative contention in para H of the appeal memorandum. However, due to inadvertent error, the said contention was not answered in the order dated 03.05.2019. There is an error. As a result of omission of this issue in the order dated 03.05.2019, the order is consequently amended by substitution of para 5 of the order - ROM application allowed.

Summary

Issues:
1. Applicability of Cenvat Credit on common input services under exemption notification.
2. Examination of reversal of credit as a defense against demand confirmation.
3. Error in the order dated 03.05.2019 necessitating rectification.
4. Benefit of exemption notification based on reversal of Cenvat Credit.

Analysis:
1. The appellant contended that duty was demanded due to availing Cenvat Credit on common input services under exemption notification no. 01/2006-ST. The appellant argued they had not availed the credit and had reversed it. The counsel referred to legal precedents like the case of Hello Minerals Water and Ashima Dyecot Ltd., emphasizing that reversal of credit amounts to non-availment. The appellant's alternative submission regarding credit reversal was not addressed in the initial order.

2. The tribunal recognized the inadvertent error in not addressing the appellant's alternative contention in the order dated 03.05.2019. Consequently, the order was amended to include the appellant's argument about reversing the Cenvat Credit. Citing legal precedents, the tribunal acknowledged that reversal of credit on common services entitles the appellant to the benefit of the exemption notification. The decision was influenced by the rulings in cases like Franco Italian Company Pvt. v. CCE and Ashima Dyecot Ltd., where reversal of credit was considered equivalent to non-availment.

3. The tribunal's decision emphasized that the reversal of Modvat credit on inputs used for duty-free goods allows manufacturers to avail full duty exemption. The tribunal highlighted the importance of reversing credit at the appropriate stage, as seen in previous judgments. Based on the legal principles established in relevant cases, the tribunal set aside the impugned order and remanded the matter for further verification and decision considering the appellant's reversal of Cenvat Credit attributable to common services.

4. Ultimately, the tribunal allowed the ROM application in favor of the appellant, granting them the benefit of the exemption notification based on the reversal of Cenvat Credit. The decision, pronounced on 16.09.2019, reflected the tribunal's acknowledgment of the legal significance of reversing credit on common services and its impact on the entitlement to exemption benefits.