2009 (7) TMI 426 - AT - Service Tax

Works Contract service - Appellant submits that only because Cenvat credit of Rs. 1,50,037/- was earlier availed against the output service, service tax demand of Rs. 92,27,535/- has been levied even though the appellant has reversed that credit with interest. Revenue contending that appellant not entitled to abatement In this case, nothing appears to be an exception to Cenvat Credit Rule 2004. If an assessee reverses the Cenvat credit availed earlier on the input, the case may be equated with non-availment situation. stay granted

Summary

Issues:
1. Applicability of Cenvat credit rules and liability for service tax demand.
2. Immunity from taxation due to reversal of Cenvat credit.
3. Entitlement to benefit of Notification of abatement in works contract.

Analysis:
1. The case involved a dispute regarding the service tax demand levied on the appellant despite the reversal of Cenvat credit. The appellant argued that after reversing the credit with interest, they should not be liable as per Rule 6 of Cenvat Credit Rules, 2004. The appellant also cited the Apex Court judgment in Chandrapur Magnet Wires (P) Ltd. v. CCE, Nagpur to support their position. The learned Counsel contended that the appellant should not be held liable for the service tax demand.

2. The Departmental Representative (DR) countered the appellant's argument by stating that merely reversing the Cenvat credit does not automatically grant immunity from taxation. The DR highlighted that the reversal was done after the period under adjudication, and without concrete evidence linking it to the Apex Court decision. Referring to previous court decisions, including Chandrapur Magnet Wires and Amrit Paper, the DR argued that the appellant cannot claim the benefit of Notification of abatement in works contract executed.

3. After hearing both sides and examining the record, the Tribunal observed that when an assessee reverses the Cenvat credit previously availed on inputs, it can be treated as a non-availment situation. The Tribunal, without delving into the merits of the case, decided to dispense with the pre-deposit during the appeal process. The Tribunal's decision was based on the rationale of the law laid down by the Apex Court and the specific circumstances of the case.

In conclusion, the Tribunal's judgment addressed the applicability of Cenvat credit rules, the consequences of reversing such credit, and the entitlement to specific benefits under the law. The decision to dispense with the pre-deposit indicated a consideration of the legal principles and the need for a fair appeal process.