2024 (1) TMI 723 - AT - Service Tax

Liability to pay 5%/6% of the value of exempted service i.e. Trading Activity - respondent have reversed the proportionate credit attributed to such exempted service along with interest - HELD THAT - There isno dispute regarding proportionate reversal of cenvat credit along with interest attributed to the value of exempted service i.e. Trading Activity. Therefore the demand under other option i.e. 5%/6% of the value of exempted service (trading activity) will not sustain as consistently held by various high court and this Tribunal and also by the judgments in SANSTAR BIO POLYMERS LIMITED VERSUS C.C.E. S.T. -RAJKOT 2021 (11) TMI 15 - CESTAT AHMEDABAD and AMI LIFESCIENCES PVT LTD VERSUS C.C.E. S.T. -VADODARA-I 2022 (4) TMI 423 - CESTAT AHMEDABAD by the learned counsel. Accordingly the issue is no longer res-integra and the same stands settled in the favour of the assessee. The impugned order is upheld and Revenue s appeal is dismissed.

Summary

Issues involved:
The issue involved is whether the respondent is liable to pay 5%/6% of the value of exempted service i.e. Trading Activity despite having reversed the proportionate credit attributed to such exempted service along with interest. The Revenue filed an appeal challenging the dropping of the show cause notice by the Adjudicating Authority based on the respondent's reversal of credit.

Issue 1: Liability to pay 5%/6% of the value of exempted service
The Adjudicating Authority dropped the show cause notice after the respondent reversed the proportionate credit attributed to exempted service i.e. Trading Activity along with interest, citing the judgment in the case of M/s. Foods, Fats & Fertilizers Ltd Vs. CCE, Guntur. The Revenue contended that since the respondent did not opt for the option of proportionate reversal of credit, they should pay 5%/6% of the value of exempted service.

Issue 2: Revenue's appeal
The Revenue argued that the respondent, by not opting for the option of proportionate reversal of credit in writing to the department, is not entitled to avoid paying 5%/6% of the value of exempted service. The Revenue sought to sustain the demand based on this ground.

Decision:
After considering the arguments, the Tribunal found no dispute regarding the proportionate reversal of cenvat credit attributed to the value of exempted service i.e. Trading Activity. Citing various judgments, including CCE vs. Himmat Glazed Tiles and others, the Tribunal held that the demand of 5%/6% of the value of exempted service will not sustain when the credit is reversed. The Tribunal upheld the impugned order, dismissing the Revenue's appeal.

Separate Judgment:
No separate judgment was delivered by the judges in this case.