2023 (8) TMI 738 - AT - Service Tax

Abatement of duty - renting of motor vehicle - abatement of 60% under Sl. No. 9 of Notification No. 26/2012-ST dated 20.06.2012 or not - extended period of limitation - HELD THAT - The issue of abatement is an indirect way of granting exemption to the extent prescribed in the statute and abatement is not normally denied on mere surmises or on any allegation of insufficient credit, considering the scheme of CENVAT Credit. But in any case, the Notification granting the benefit of abatement does not exempt wholly or partially the rate of tax and therefore, no such rigorous exercises are required to be employed, unlike in cases of exemption notifications. That is to say, the abatement Notification merely sanctifies the deduction in the assessable value of taxable services, the availment of CENVAT Credit is a caveat for eligibility to claim abatement. The Mumbai Tribunal in the case of M/s. Indian Oil Tanking Pvt. Ltd. 2017 (7) TMI 293 - CESTAT MUMBAI has dealt with an identical issue and the Bench, after considering a catena of decisions, has held denial of abatement would be an act of encroachment by taxing sale of goods which is beyond the scope of legislative authority. To avoid such encroachment, erasure of credit is the only option. There is no allegation that such erasure has lead to deficiency of available credit at any time. Erasure would thus be substantial compliance and hence denial of abatement in the impugned order is not tenable. Coming back to the case on hand, the Assistant Commissioner records the reply of the appellant that they had reversed certain amount of CENVAT Credit by adopting the procedure given under Rule 6(3AA) (sic), but however, the same is not accepted for the reason that abatement is not exemption - it is also not found from the statute any distinction being made, as done by the adjudicating authority, but the facts borne on record clearly reflect the action in good faith by the appellant in reversing voluntarily before claiming abatement, which is the condition precedent in terms of the abatement Notification. Thus, the denial of abatement by the authorities below is not in accordance with law and consequently, they are liable to be set aside. Extended period of Limitation - HELD THAT - The claim of abatement is, therefore, available in the S.T.-3 returns which was only sought to be denied and that per se would not amount to mis-declaration because the appellant claimed the abatement based on its understanding of the law and the authority chose to deny the same perhaps giving a different interpretation of the Notification. Hence, there cannot be any scope for mis- declaration, that too with an intention to evade payment of tax. Therefore, the demand, if any, for the normal period alone can sustain - demand is already set aside on merits. On merits, the appellant should succeed - Appeal allowed.

Summary

Issues Involved:
1. Eligibility for abatement under Notification No. 26/2012-ST.
2. Availment and reversal of CENVAT Credit.
3. Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994.
4. Allegation of mis-declaration and intent to evade tax.

Summary:

Issue 1: Eligibility for Abatement
The Revenue doubted the appellant's eligibility for availing abatement of 60% on "renting of motor vehicle" services under Notification No. 26/2012-ST, as the appellant allegedly did not fulfill the conditions prescribed. The Show Cause Notice alleged that the appellant was availing CENVAT Credit on input services, making them ineligible for the abatement, resulting in a demand of Rs. 36,16,412/-.

Issue 2: Availment and Reversal of CENVAT Credit
The appellant contended that they did not avail any CENVAT Credit on inputs, input services, or capital goods attributable to the renting of motor vehicle services. They argued that they reversed the attributable CENVAT Credit along with interest as per Rule 6(3AA) of the CENVAT Credit Rules, 2004. The adjudicating authority, however, did not accept this reversal as sufficient compliance, stating that abatement is not an exemption.

Issue 3: Extended Period of Limitation
The Show Cause Notice invoked the extended period of limitation under Section 73(1) of the Finance Act, 1994, alleging that the wrong availment of abatement would have gone unnoticed but for the audit team's findings. The appellant argued that the larger period was invoked improperly.

Issue 4: Mis-declaration and Intent to Evade Tax
The Show Cause Notice accused the appellant of mis-declaration with an intent to evade payment of correct Service Tax. The Tribunal found that the appellant's claim for abatement was based on their understanding of the law, and the Revenue's denial was based on a different interpretation of the Notification. Therefore, there was no scope for mis-declaration or intent to evade tax.

Tribunal's Findings:
1. Abatement Eligibility: The Tribunal held that subsequent reversal of CENVAT Credit meets the test of substantial compliance for claiming abatement, as established in various CESTAT decisions. The denial of abatement by the authorities was not in accordance with law.
2. Reversal of CENVAT Credit: The Tribunal found the appellant's action in good faith by voluntarily reversing the credit before claiming abatement, fulfilling the condition precedent in terms of the abatement Notification.
3. Extended Period of Limitation: The Tribunal noted that the claim of abatement was available in the S.T.-3 returns and did not amount to mis-declaration. Therefore, the demand for the extended period could not sustain.
4. Mis-declaration and Intent to Evade Tax: The Tribunal concluded that there was no mis-declaration or intent to evade tax, as the appellant's claim was based on their interpretation of the law.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal with consequential benefits, holding that the appellant was eligible for the abatement and that the demand for the extended period was not justified.