2014 (2) TMI 526 - AT - Service Tax

Availment of CENVAT Credit - benefit of Notification No. 1/2006-ST dated 1.3.2006 - Penalty u/s 76 - Held that - if the CENVAT credit is reversed subsequently also, it amounts to the credit not being taken initially. Therefore, prima facie, the subsequent reversal of CENVAT credit availed by the appellant appears to fulfill the obligation under Notification No. 1/2006-ST of not availing the CENVAT credit for entitlement to the benefit of Notification - Appellant has made out a strong prima facie case in their favour for wavier of predeposit and grant of stay - Stay granted.

Summary

Issues:
1. Availment of CENVAT credit during the disputed period.
2. Disallowance of rebate under Notification No. 1/2006-ST.
3. Imposition of penalty under Section 76 of Finance Act 1994.

Analysis:
1. The appellant, engaged in 'erection, commissioning, and installation service,' sought the benefit of Notification No. 1/2006-ST, which prohibits availing CENVAT credit on input service for service tax payment. Despite availing CENVAT credit during the period in question, the appellant reversed the credit in July 2009, relating to the period from October 2008 to June 2009. Subsequently, proceedings were initiated to disallow the rebate under the notification, resulting in a demand for service tax exceeding Rs. 1.72 crores with interest. Additionally, a penalty under Section 76 of the Finance Act 1994 was imposed.

2. The appellant contended that by promptly reversing the availed CENVAT credit upon identification of the omission, they fulfilled the obligation of not availing the credit under Notification No. 1/2006-ST. The advocate cited Tribunal decisions supporting the view that subsequent credit reversal equates to non-availment initially, referencing the case of Hello Minerals Water (P) Ltd. Vs. Union of India [2004(174)ELT 422(All.)]. The Commissioner (A.R.) did not present contradictory decisions at that stage, acknowledging the persuasive nature of the cited rulings.

3. Upon reviewing the submissions and cited decisions, the Tribunal acknowledged the precedent that reversing CENVAT credit subsequently implies non-availment initially, aligning with the requirements of Notification No. 1/2006-ST. Consequently, the Tribunal found a strong prima facie case in favor of the appellant for waiving the predeposit requirement and granting a stay. As a result, the Tribunal waived the predeposit of the outstanding service tax, interest, and penalties until the appeal's final disposal.

This detailed analysis encapsulates the key legal issues, arguments presented, relevant legal provisions, and the Tribunal's decision, providing a comprehensive understanding of the judgment's implications and reasoning.