2017 (7) TMI 989 - AT - Service Tax

CENVAT credit - Chartered Accountant Services - common input services - Security Service - Telephone Service - Held that - where contention of the assessee was that their transaction was covered by provisions of Sub-rule (1) of Rule 6 of CCR, 2004, it was necessary for Revenue to establish in the Show Cause Notice that the said transaction attracted provisions of Sub-rule (2) of said Rule 6 that Cenvat Credit was availed in respect of such input services to such extent that they were used for providing both taxable & exempted services and no separate account was maintained and hence provisions of Sub-rule (3) of Rule 6 ibid were invocable - I do not find from the said Show Cause Notice that Cenvat credit was availed on such quantity of input service which was used for providing exempted output service and the situation was covered by Sub-rule (1) of said Rule 6. Therefore, there was no case for invocation of Sub-rule (3) of said Rule 6. The said SCN dated 13/03/2015 is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appeal against Order-in-Appeal No.GZB-EXCUS-000-APP-981-16-17 dated 18/01/2017.
2. Availing Cenvat credit on common input services.
3. Exemption of certain activities from Service Tax prior to 01/04/2011.
4. Show Cause Notice demanding payment under Sub-rule 3 of Rule 6 of Cenvat Credit Rules, 2004.
5. Appeal before Commissioner (Appeals) rejected, leading to appeal before the Tribunal.

Analysis:
The case involves an appeal against Order-in-Appeal No.GZB-EXCUS-000-APP-981-16-17 dated 18/01/2017. The appellants, engaged in providing Chartered Accountant Services, were found to be availing Cenvat credit on common input services like Security Service & Telephone Service. The Revenue alleged that the appellants were not maintaining separate accounts for exempted services prior to 01/04/2011, leading to a demand under Sub-rule 3 of Rule 6 of Cenvat Credit Rules, 2004. The appellants contended that they did not avail Cenvat credit for exempted services, challenging the Show Cause Notice's sustainability.

Upon review, the Tribunal noted that the Show Cause Notice failed to establish that the appellants availed Cenvat credit for input services used in providing both taxable and exempted services, as required under Sub-rule (2) of Rule 6. The Tribunal found no evidence in the Notice indicating the applicability of Sub-rule (3) of Rule 6, which necessitates the absence of separate accounts. Consequently, the Tribunal held the Show Cause Notice dated 13/03/2015 as unsustainable. Accordingly, the Tribunal set aside both the impugned Order-in-Original and Order-in-Appeal, allowing the appeal and granting the appellant consequential relief as per law.

This judgment highlights the importance of establishing compliance with specific provisions of Cenvat Credit Rules, particularly regarding the availing of Cenvat credit on input services used for both taxable and exempted services. It underscores the necessity for Show Cause Notices to clearly delineate the basis for invoking relevant rules and the burden on Revenue to substantiate alleged non-compliance. The decision emphasizes the need for meticulous scrutiny of factual and legal aspects in tax disputes to ensure procedural and substantive fairness in adjudication.