2014 (11) TMI 626 - AT - Service Tax

Reversal of CENVAT Credit - Cargo Handling Service - Held that - Appellant have no other exempted service except being attributable to export i.e. services rendered for facilitating export which are not taxable by virtue of export. Therefore, I find that no reversal is required under the provisions of Rule 6(3)(ii) read with Rule 6(3A) as the appellant has availed credit suo motu mistakenly. Further, I hold that the appellant is entitled to the benefit as provided under Rule 6(6)(v) of the Cenvat Credit Rules, 2004. In this view of the matter, the impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
1. Correct reversal of CENVAT Credit under Rule 6(3)(2) of the Cenvat Credit Rules, 2004.
2. Applicability of Rule 6(6)(v) regarding reversal of input tax credit for services utilized for export.

Analysis:

Issue 1: Correct Reversal of CENVAT Credit under Rule 6(3)(2)
The appellant, a CFS operator, maintained separate Books of Account for two CFS locations, one fully taxable and the other partially taxable due to export services. A show-cause notice was issued for disallowing proportionate common input service credit, leading to a duty confirmation order. The Commissioner (Appeals) upheld the duty, stating the appellant's distinction for input service credit was unauthorized. The appellant argued that Rule 6(6)(v) exempted them from reversal as they provided no exempted service. Citing precedents, the appellant contended that no reversal was warranted for export services. The Revenue supported the duty order, emphasizing the correctness of the disallowed amount calculation.

Issue 2: Applicability of Rule 6(6)(v) for Export Services
The appellant asserted that Rule 6(6)(v) absolved them from reversing input tax credit for export services. The Tribunal found the appellant had no other exempted services apart from those aiding exports, which were non-taxable due to export. Consequently, the Tribunal ruled in favor of the appellant, holding that no reversal was necessary under Rule 6(3)(ii) and Rule 6(3A). The Tribunal acknowledged the appellant's mistaken credit availing and granted relief under Rule 6(6)(v), setting aside the duty order and allowing the appeal with consequential relief.

This judgment clarifies the correct application of Rule 6(3)(2) for CENVAT Credit reversal and the scope of Rule 6(6)(v) in exempting input tax credit for services utilized for export, ensuring compliance with tax regulations and providing relief to eligible entities.