2012 (4) TMI 197 - AT - Service Tax

Cenvat credit while availing benefit of abatement - Commercial and Industrial Construction - held that - , in respect of a contract where the assessee has not taken input credit prior to 01.03.2006 and input/input service tax credit on or after 01.03.2006, the assessee would be rightly entitled for the benefit under the notification no. 15/2004-ST as replaced by notification no. 1/2006 dated 01.03.2006. In a case where the assessee avails CENVAT credit, then in such cases the assessee is not entitled for abatement and the service tax liability will have to be discharged on the full value of the contract. There is nothing in these notifications which prevents an assessee from not availing CENVAT credit and paying service tax on 100% of the contract value in respect of one particular contract and availing abatement and not availing CENVAT credit in respect of another contract. In other words, there is no stipulation in the notification that the option to avail/non-avail CENVAT credit has to be exercised uniformly in respect of all the contracts executed by the assessee. It is for the assessee to choose which formulation he wants to follow in a given contract. Whether for the purpose of discharge of service tax liability, accumulated CENVAT credit arising from some other case/contract can be utilized or not. - held that - there is no such bar or restriction/prescribed in the notification. The notification only stipulates that in respect of a case/contract, where abatement is availed, no CENVAT credit on inputs, capital goods or input services shall be taken. So long as this condition is satisfied, abatement is permissible.

Issues Involved:
1. Eligibility of abatement under Notification No. 15/2004-ST and 1/2006-ST.
2. Interpretation of conditions for availing CENVAT credit.
3. Impact of centralized registration on availing abatement.
4. Utilization of accumulated CENVAT credit for discharge of service tax liability.
5. Validity of extended period for demand of service tax.

Issue-wise Detailed Analysis:

1. Eligibility of Abatement under Notification No. 15/2004-ST and 1/2006-ST:
The appellant, M/s Bharat Heavy Electrical Ltd. (BHEL), was availing abatement of 67% on the total contract value under Notification No. 15/2004-ST and its successor, Notification No. 1/2006-ST. The abatement was subject to the condition that CENVAT credit on inputs or capital goods was not taken. The appellant contended that they complied with these conditions for certain contracts and paid service tax on the full value for others where CENVAT credit was availed. The Tribunal noted that the notifications allowed abatement in cases where CENVAT credit was not taken on inputs/input services, and the appellant's compliance with these conditions on a contract-by-contract basis was valid.

2. Interpretation of Conditions for Availing CENVAT Credit:
The Tribunal emphasized that the condition of non-availment of CENVAT credit applied to individual contracts and not uniformly across all contracts executed by the appellant. The notifications used the term "in cases where" indicating that each contract could be treated separately. Therefore, the appellant was entitled to abatement for contracts where they did not take CENVAT credit and liable to pay service tax on the full value for contracts where CENVAT credit was availed.

3. Impact of Centralized Registration on Availing Abatement:
The Tribunal clarified that centralized registration for filing returns and payment of service tax was merely a facility for accounting purposes and did not affect the appellant's entitlement to abatement under the notifications. The benefit of the notifications could be availed as long as the specified conditions were met, irrespective of centralized registration.

4. Utilization of Accumulated CENVAT Credit for Discharge of Service Tax Liability:
The Tribunal held that there was no restriction in the notifications against using accumulated CENVAT credit from other contracts for discharging service tax liability on non-abated portions of contracts. The condition was only that no CENVAT credit should be taken on inputs, capital goods, or input services for the specific contract where abatement was claimed.

5. Validity of Extended Period for Demand of Service Tax:
The appellant argued that the extended period for demand was not applicable as all relevant facts were disclosed to the department through correspondence and returns. The Tribunal did not explicitly rule on this issue but remanded the matter back to the adjudicating authority for reconsideration and re-computation of the differential service tax demand based on the clarified interpretation of the notifications.

Conclusion:
The Tribunal set aside the impugned orders and remanded the matter for fresh consideration, directing the adjudicating authority to re-compute the differential service tax demand, if any, based on the clarified interpretation of the notifications. The appeals were allowed by way of remand.

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