2018 (8) TMI 1399 - AT - Service Tax

Reversal of CENVAT Credit - appellant provided both taxable as well as exempted service - the appellant had reversed the CENVAT Credit availed by it in respect of the exempted service provided to PWD, by availing the exemption benefit under Notification dated 20.06.2012 and also paid the interest at the appropriate rate. Held that - TThe issue arising out of present dispute is no more res integra in view of decision in the case of Ahmednagar Zilla Prathamik Shikshak Sahakari Bank Ltd & Ahmednagar Shahar Sahakari Bank Ltd. v. Commissioner of Central Excise, Aurangabad 2018 (4) TMI 1330 - CESTAT MUMBAI , where it was held that since the appellants have reversed the CENVAT credit and also paid interest on such delayed reversal of credit, demand cannot be confirmed on the appellants. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the department can proceed for recovery under Rule 6 of Cenvat Credit Rules, 2004 after reversal of CENVAT Credit on exempted service along with interest and imposition of penalties.

Analysis:
The appellant, engaged in providing works contract service, faced a dispute regarding the payment of service tax liability for both taxable and exempted services. The appellant had availed exemption under Notification 25/2012-S.T. for providing services to the Public Works Department. The department proceeded under Rule 6 of the Cenvat Credit Rules, 2004, demanding payment of 8% / 10% of the value of exempted service. The appellant reversed the CENVAT Credit on exempted services and paid interest as per the notification. The matter was adjudicated against the appellant, leading to an appeal by the Revenue before the Commissioner (Appeals), who confirmed the CENVAT Credit demand, interest, and imposed a penalty on the appellant.

The key question before the Tribunal was whether, after the reversal of CENVAT Credit on exempted services along with interest, the department could proceed for further recovery under Rule 6 of the Cenvat Credit Rules, 2004 and impose penalties on the appellant. The Tribunal referred to a previous order and highlighted that once the appellant had reversed the CENVAT Credit and paid interest, the demand for recovery of the value of exempted services could not be confirmed. The Tribunal relied on precedents to emphasize that the option to reverse CENVAT Credit, once exercised, precludes the confirmation of demand for recovery of exempted service value. Therefore, the Tribunal concluded that the impugned order by the Commissioner (Appeals) could not be sustained, setting it aside and allowing the appeal with any consequential relief.

In conclusion, the Tribunal's decision clarified that once the appellant had reversed the CENVAT Credit on exempted services and paid interest, the department could not proceed for further recovery under Rule 6 of the Cenvat Credit Rules, 2004 or impose penalties. The Tribunal relied on established legal principles and precedents to support its decision, providing relief to the appellant in this case.