2021 (8) TMI 233 - AT - Service Tax

Re-credit of Cenvat Credit alrady reversed (suo motu) - Storage and Warehousing services - storage of rice - rice is agricultural produce or not - agricultural produce after introduction of Negative List or not - Clause (d) of section 66D of Finance Act - HELD THAT - When Notification No.4/2014 made the Storage and Warehousing Services of rice to be exempted services, the said service became taxable for the period 01.07.2012 to 16.02.2014. The appellants had been reversing the proportionate credit on the common input services availed by them. When the reversal/adjustment is made under Rule 6(3A), the time-limit as prescribed in the Cenvat Credit Rules, 2004 would apply. In the present case, the re-credit is an adjustment/correction of the excess reversal which was not required to be made by them. The appellants are not eligible to take suo motu re-credit of an amount of ₹ 20,83,773/-. So also, the allegation of the department that the credit ought to have been take before 30th of June of the succeeding year is without any basis in the facts of this case as it is not reversal of proportionate credit but only re-credit of the credit which was not required to be reversed. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Re-credit of service tax amounting to ?20,83,774/- taken in March 2014.

Analysis:
1. The appellants provided storage and warehousing services for rice, considering it as an exempted service even after the negative list introduction. However, a subsequent amendment clarified that these services were taxable until March 2014. The appellants paid arrears and interest for this period. They then took suo motu re-credit of ?20,83,773/-, the excess credit reversed earlier. The department disputed this re-credit, arguing it was not eligible and should have been adjusted before June 2013. A show-cause notice was issued, leading to the original authority confirming the demand with interest and penalty.

2. The appellants contended that the re-credit was valid as they intimated the department promptly and relied on a High Court decision supporting their right to take such credit. They argued that the re-credit was not an adjustment under Rule 6(3A) and thus not subject to the time-limit for reversal/adjustment of credit. The department, however, maintained that the re-credit contravened Cenvat credit rules by not being adjusted within the prescribed period.

3. The Tribunal examined the re-credit issue and found it to be a correction of excess reversal, not requiring adjustment under Rule 6(3A). The High Court precedent cited by the appellants supported their eligibility to take suo motu credit. The Tribunal concluded that the appellants were entitled to the re-credit of ?20,83,773/- as it was not a reversal of proportionate credit but a correction of unnecessary reversal. The allegation that the re-credit should have been taken before June 2013 was dismissed, as it was not a reversal but a re-credit of unrequired credit.

4. Consequently, the Tribunal held that the impugned order was unsustainable and set it aside. The appeal was allowed, providing consequential reliefs if applicable.