2017 (4) TMI 900 - AT - Service Tax

Abatement - N/N. 1/2006-ST dated 01/03/2006 - denial on the ground that the assessee has availed credit - Held that - the appellants have reversed the full Cenvat credit availed alongwith applicable interest later. All the credits alongwith applicable interest have been reversed before adjudication by the Commissioner - reliance was placed in the case of CCE Jaipur-I Versus M/s. Sanjay Engineering Industries 2016 (8) TMI 93 - RAJASTHAN HIGH COURT where it was held that subsequent reversal of credit even after utilization of the same and clearance of the final product will relate to a situation as if no credit was ever availed - the denial of abatement under N/N. 1/2006-ST is not justifiable - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Claim of abatement under Notification 1/2006-ST while availing Cenvat credit on input services.

Analysis:
The appeal challenged an order by the Commissioner of Central Excise, Jaipur, regarding the denial of abatement under Notification 1/2006-ST due to the appellant availing Cenvat credit on input services. The appellants, engaged in hotel services, claimed they reversed the Cenvat credit along with interest, making them eligible for abatement. The Original Authority imposed a service tax liability on the appellant and penalties. The appellant cited various cases in defense, emphasizing the reversal of credit and interest. The learned AR supported the impugned order, stating the reversal post-usage does not allow abatement. The Tribunal noted the reversal of credits before adjudication but held the reversal after usage does not qualify for abatement under the notification's strict conditions.

The Tribunal referred to judgments by various High Courts and the Supreme Court, emphasizing the importance of strict interpretation of notification conditions. Notably, the Hon'ble Rajasthan High Court and Allahabad High Court decisions supported the appellant's position on reversal of credit post-usage. The Gujarat High Court judgment also aligned with the appellant's argument, emphasizing the entitlement to exemption after credit reversal. The Tribunal distinguished the Revenue's reliance on the Hind Lamps Ltd. case, emphasizing the need for strict construction of exemption notifications. The Allahabad High Court's decision in the Hello Minerals case was pivotal, stating reversal of credit amounts to non-credit on inputs, entitling the benefit of exemption. The Tribunal concluded that the denial of abatement under Notification 1/2006-ST was unjustified, setting aside the impugned order and allowing the appeal.

The Tribunal's decision was supported by precedents from the Hon'ble Madras High Court and Andhra Pradesh High Court, adopting a similar legal stance. The settled legal position indicated that denial of abatement under the notification was unwarranted, leading to the appeal's success. The judgment highlighted the significance of timely credit reversal and adherence to the strict conditions of the notification for claiming abatement effectively.