2009 (6) TMI 410 - AT - Service Tax

Exemption sale of goods and materials used in providing services - Appellants are engaged in the providing Commercial and Industrial Construction Services, service of construction of residential complex and transportation of goods by road. They have availed the benefit of Notification No. 12/2003 dated 26-2-2003 Exemption denied on ground that credit availed in violation of notification credit to be reversed, if availed, when goods sold - Further there are several decisions of the Tribunal that subsequent reversal of the Cenvat credit also amounts to non-availment of Cenvat credit which have been rendered in respect of Rule 6(3) of Cenvat Credit Rules. - The demand has been confirmed only on the ground that the once the benefit of Notfn. 12/2003 has been availed, no Cenvat credit can be taken and if Cenvat credit is taken in respect of other goods Notfn. 12/2003 benefit cannot be availed. It is not clear how exactly the appellants have violated the condition of the Notification. In view of the above discussion, we waive the requirement of pre-deposit under Section 35F and allow the stay petition and since the issue is required to be re considered by the lower authorities in the light of above observations, we remand the matter to Commissioner (Appeals) to decide the matter afresh.

Summary

Issues:

1. Interpretation of Notification No. 12/2003 regarding exemption from service tax.
2. Eligibility for exemption in cases where Cenvat credit has been availed.
3. Reversal of Cenvat credit and its impact on availing exemption under Notification No. 12/2003.

Analysis:

1. The case involved the interpretation of Notification No. 12/2003, which provides an exemption from service tax in specific cases. The Notification states that the exemption applies only when no credit of duty paid on goods and materials sold has been taken under the Cenvat Credit Rules, 2004, or if such credit has been taken, the service provider must pay an amount equal to the credit before the sale of goods and material.

2. The Appellants had availed Cenvat credit on materials used while providing services, leading to a demand for service tax. The Advocate argued that the Notification is applicable only to goods sold while providing services and not for availing Cenvat credit on other goods. The Revenue contended that the exemption is available only when no credit has been taken on goods sold.

3. The Tribunal found merit in the Advocate's argument, stating that the Notification applies to goods sold during services, and availing Cenvat credit on other goods does not disqualify the Appellants from the exemption. The lower authorities had held that once Cenvat credit is taken, the value of goods sold cannot be deducted, but the Tribunal disagreed, emphasizing that subsequent reversal of Cenvat credit does not amount to non-availment. The matter was remanded for reconsideration by the Commissioner (Appeals) in light of these observations. The Tribunal waived the pre-deposit requirement under Section 35F and allowed the stay petition.