2012 (12) TMI 542 - AT - Service Tax

Assessee provide services in the state of J&K and to SEZ - Service provided in the state of J&K does not attract service tax leviable under Sec.66 - Services provided to the units situated in SEZ is exempted vide Notification 4/2004-ST dated 31.3.2004. Assessee had not maintained separate accounts in respect of receipt, consumption and inventory of input services meant for use in providing output service - Which are chargeable to tax as well as exempted service, as provided under Rule 6(2) of CCR, 2004 - Availed cenvat credit on the entire input services received by them Revenue contended that if cenvat credit on common input services is not taken, appellant is required to maintain separate accounts Assessee argued that once a service tax paid on input services has not been taken at all, the provisions of Rule 6(3)(c) of CCR would not be applicable Issue remand back to revenue and waive the requirement of pre-deposit of service tax demanded by Commissioner. Held that - As the assessee did not fulfill their obligation which has resulted in impugned order. Therefore an amount of pre-deposit required to be deposit by assessee. And also submit copies of the relevant documents with a worksheet showing the details of documents on the basis of which credit is taken and the details of credit utilized. Appeal remand back to AO

Summary

Issues:
1. Applicability of Cenvat Credit Rules on exempted and taxable services.
2. Requirement of maintaining separate accounts for input services.
3. Utilization of Cenvat credit exceeding permissible limits.
4. Failure to produce documents for verification.
5. Cooperation with the Revenue department in the investigation process.

Analysis:
1. The judgment addressed the issue of the applicability of Cenvat Credit Rules on exempted and taxable services provided by M/s. Avaya Global Connect Limited (M/s. AGC). It was observed that services provided to customers in Jammu & Kashmir and units in SEZ were exempted from service tax. The appellant had availed Cenvat credit on all input services without maintaining separate accounts for taxable and exempted services, leading to the utilization of credit beyond permissible limits. This resulted in a demand for the short payment of service tax amounting to Rs. 3,52,81,421/-, which was recovered from the appellant under the relevant provisions of the Finance Act, 1994 and Cenvat Credit Rules, 2004.

2. The judgment also delved into the requirement of maintaining separate accounts for input services as per Rule 6(2) of Cenvat Credit Rules, 2004. The Tribunal emphasized that separate accounts were necessary only when a service provider avails Cenvat credit for both taxable and exempted services. The Commissioner's order was remanded for fresh decision as proper verification had not been conducted to ascertain whether the appellant had indeed not taken Cenvat credit on common input services. It was highlighted that unless it was proven that the appellant had availed credit for input services used in providing exempted services, the demand could not be sustained. The matter was sent back for verification to determine the correctness of the appellant's claim regarding the ten services for which credit had not been taken.

3. The judgment discussed the issue of the appellant's utilization of Cenvat credit exceeding the permissible limits, leading to the demand for the short payment of service tax. The Tribunal emphasized the importance of verifying the actual utilization of credit and directed the Commissioner to conduct a thorough investigation to validate the appellant's claim of not availing credit for input services used in providing exempted services. The judgment highlighted the need for cooperation between the appellant and the Revenue department during the verification process to ensure a fair adjudication.

4. Another issue addressed in the judgment was the failure of the appellant to produce documents for verification, as reported by the Assistant Commissioner. The Commissioner's order was based on the lack of cooperation from the appellant in submitting relevant records for scrutiny. The Tribunal noted that the appellant's non-compliance with document submission had contributed to the adverse order passed against them.

5. Lastly, the judgment emphasized the importance of cooperation between the appellant and the Revenue department during the investigation process. It was highlighted that the appellant had not extended full cooperation, which hindered the verification process. The Tribunal stressed the need for the appellant to provide necessary details and documents as directed to ensure a fair adjudication. The judgment required the appellant to deposit a specified amount and submit relevant documents within a stipulated timeframe to demonstrate compliance and cooperation with the investigation process. Failure to comply with the directives would result in the rejection of the appeal.