2007 (12) TMI 73 - AT - Service Tax

Broadcasting service & also provided Video Tape Production Service - adj. authority restricted the input service tax credit to 20% invoking Rule 6(3) (c) - grievance of the appellants is against denial of input service tax credit to the extent of 80% of the tax paid on output service on the ground that US FEED is non-taxable service- tax on the output service US FEED was paid but it was not known to commissioner while recording adverse finding, so matter remanded

Summary

Issues:
1. Denial of input service tax credit to the appellant
2. Interpretation of Rule 6(3)(c) of the Cenvat Credit Rules, 2004
3. Request for remand of the case for further adjudication

Analysis:

Issue 1: Denial of input service tax credit to the appellant
The appellant, a broadcasting service provider, had paid service tax on the output service 'US FEED' during the disputed period. However, the Commissioner restricted the input service tax credit to 20% under Rule 6(3)(c) of the Cenvat Credit Rules, 2004, citing that 'US FEED' was deemed a non-taxable service. The appellant contended that they paid the service tax on 'US FEED' in December 2006, after the impugned order was passed, and thus had not provided these details during the adjudication. The Tribunal acknowledged that the payment for 'US FEED' was made and returns were filed later, leading to the need for a remand to allow the appellant to present evidence of tax payment on 'US FEED' and input services. The impugned order was set aside for fresh adjudication.

Issue 2: Interpretation of Rule 6(3)(c) of the Cenvat Credit Rules, 2004
The adjudicating authority invoked Rule 6(3)(c) to limit the input service tax credit to 20% due to the classification of 'US FEED' as a non-taxable service. The appellant argued that they had paid the service tax on 'US FEED' post the Commissioner's decision, and thus, the denial of input service tax credit was unjustified. The Tribunal agreed that the circumstances warranted a remand to allow the appellant to substantiate the tax payments and input service tax credit claims.

Issue 3: Request for remand of the case for further adjudication
The appellant requested a remand of the case to present evidence of tax payment on 'US FEED' and input services, which were not submitted earlier due to the timing of the tax payments post the Commissioner's decision. The Tribunal found merit in the request and set aside the impugned order, directing the Commissioner to conduct a fresh adjudication, considering the evidence of tax payments and input service tax credit claims.

In conclusion, the Tribunal allowed the appeal by remanding the case for further adjudication to address the denial of input service tax credit and the interpretation of Rule 6(3)(c) in light of the tax payments made post the initial decision.