2017 (9) TMI 552 - AT - Service Tax

N/N. 1/2006-ST - denial on the ground CENVAT credit in respect of various inputs and input services were availed by the appellant - Held that - The fact is not under dispute that the credit so availed was reversed by the appellant suo moto and no proceedings were initiated for recovery of such credit. Thus, upon reversal of CENVAT credit on the input service, it has to be construed that no credit has at all been taken by the appellant. The Hon ble Supreme Court in the case of Chanderpur Magnet Wires Pvt. Ltd. 1995 (12) TMI 72 - SUPREME COURT OF INDIA have held that on reversal of modvat credit, the appellant is entitled to avail exemption - In this case, since the credit was reversed the benefit of N/N. 1/2006-ST should be available to the appellant for claim of abatement. In view of CBEC vide Circular dated 10.05.2011, since the appellant has not provided the services mentioned therein, service tax demand on the restaurant service cannot be confirmed against the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Denial of benefit claimed under Notification No.1/2006-ST due to availing cenvat credit on inputs.
2. Liability of service tax on open-air restaurant services.

Analysis:
1. The appeal challenged an order confirming a service tax demand against the appellant, along with penalties, based on two issues. Firstly, denial of benefit under Notification No.1/2006-ST due to availing cenvat credit on inputs, which the appellant reversed subsequently. The appellant argued that the reversal of credit should be considered as non-availment, citing the Supreme Court judgment in Chanderpur Magnet Wires Pvt. Ltd. v. Commissioner of Central Excise. The Tribunal agreed that upon reversal of cenvat credit, the appellant was entitled to the benefit of the notification for claim of abatement.

2. The second issue pertained to the liability of service tax on services provided by an open-air restaurant. The appellant contended that no service tax should be levied on such restaurants as they did not meet the criteria specified in Section 65(105)(zzzv) of the Finance Act, 1994. The appellant referred to Circular No.139/8/2011-TRU to support their argument that open-air restaurants were not within the taxable service ambit. The Tribunal noted that the restaurant in question did not fulfill the conditions of having air conditioning and a license to serve alcoholic beverages, as required by the law. Referring to a CBEC circular, the Tribunal held that service tax demand on the restaurant service could not be upheld against the appellant.

3. After hearing both sides and examining the case records, the Tribunal found that the appellant had valid grounds for their arguments on both issues. Consequently, the impugned order was deemed to lack merit, leading to the appeal being allowed in favor of the appellant on 13.07.2017.