2024 (5) TMI 328 - AT - Service Tax

Reversal of CENVAT Credit - common facilities used in providing taxable and exempted services - non-maintenance of separate accounts as per Cenvat Credit Rules (CCR) 2004 - short payment of service tax which occurred due to utilisation of ineligible CENVAT credit - HELD THAT - The issue on hand can be analysed separately for two periods (a) upto March 2008 and (b) after April 2008 when Rule 6 of CCR 2004 was amended. - (a) For the period upto March 2008 there was no provision for proportionate reversal of the credit already taken and if entire credit is availed they could utilise only 20% of the output tax of a month through cenvat credit - (b) For the period after April 2008 a procedure has been prescribed under Rule 6(3A) to provisionally reverse the credit every month based on a calculation/ formula prescribed therein and to finally pay difference in reversal after completion of annual calculation by 30th June of the succeeding year. The appellant submitted the certificates issued by Chartered Accountant(CA) to prove that they have maintained separate accounts. However adjudication authority has not considered the certificates issued by CA since it does not report that it is maintained from receipt stage and also do not state that they are in conformity with the statutory provisions viz. Rule 6 of CCR 2004. On a combined reading of the report of Range officer findings of the Adjudication authority as stated above and considering the report of Chartered Accountant(CA) which categorically certified that the appellant is maintaining separate records and have been making reversal of balance amounts at end of every month the appellant has complied with the provisions of rule 6 of CCR 2004 and hence findings in the impugned orders are not sustainable. However it is found that there is an amount of 29, 24, 565/- which remains to be reversed by them. Thus this amount is required to be reversed along with interest. Appeal allowed.

Summary

Issues Involved:
1. Separate accounts maintenance as per Cenvat Credit Rules (CCR), 2004.
2. Voluntary payment and short payment of service tax.
3. Reversal of Cenvat credit.
4. Compliance with Rule 6 of CCR, 2004.

Summary:

1. Separate Accounts Maintenance:
The appellant, M/s. Trans Asia Shipping Services Pvt. Ltd., was alleged to have not maintained separate accounts for taxable and exempted services as per Cenvat Credit Rules (CCR), 2004. An investigation revealed that the appellant voluntarily paid Rs. 23,04,355/- as short payment due to erroneous credit on common input services and Rs. 3,98,281/- as interest. However, demands were made for the period from May 2006 to March 2010 due to the utilization of ineligible CENVAT credit. The appellant was also alleged to have not exercised any option by intimating the jurisdictional Range officer as per Rule 6 of CCR, 2004 for the period from 2011 to 2013, and a reversal of Cenvat credit was proposed.

2. Voluntary Payment and Short Payment of Service Tax:
The appellant voluntarily paid certain amounts during the investigation, but it was alleged that these payments were short of the actual service tax due. The adjudicating authority confirmed the demands for the period from May 2006 to March 2011. The appellant filed appeals against these orders.

3. Reversal of Cenvat Credit:
The adjudicating authority dropped proceedings for the period from 01.04.2011 to 31.03.2012 after obtaining a report from the Range Officer, which confirmed that the appellant maintained proper accounts. The Revenue's appeal against this order was dismissed by the Tribunal and later by the Hon'ble High Court of Kerala, which upheld that the appellant maintained separate accounts in compliance with Rule 6(2) of CCR, 2004.

4. Compliance with Rule 6 of CCR, 2004:
The Tribunal directed the appellant to produce documentary evidence, including invoices and CENVAT credit details, for verification. The Range Officer confirmed that the appellant maintained separate accounts as required under Rule 6(2) of CCR, 2004. The Tribunal, relying on the Range Officer's report and the Chartered Accountant's certificate, found that the appellant complied with the provisions of Rule 6 of CCR, 2004.

Final Decision:
The Tribunal allowed the appeals filed by the appellant for the periods in question, subject to the payment of Rs. 29,24,565/- along with interest. The Tribunal concluded that the appellant maintained separate accounts and complied with the provisions of Rule 6 of CCR, 2004. The appeals were allowed with consequential relief as per law.