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2020 (1) TMI 67 - AT - Service TaxCENVAT Credit - Excess payment of service tax and excess availment of the credit - GTA service - abatement claim - service taxable at 25% and there is exemption of 75% - Revenue s only objection is that the appellant should have paid 25% service tax, in which case they would be entitled to credit of only that amount of tax so paid by them - HELD THAT - The only allegation in the show cause notice was excess payment of service tax and excess availment of the credit. As such it was only this legal issue which was required to be examined and there was no question of production of any evidence etc. before the Commissioner (Appeals). The appellate authority has clearly gone wrong on the subject. It is well settled law that an assessee cannot be compelled to avail the exemption, which in any case is conditional exemption. The revenue did not raise any objection at the time of payment of 100% service tax. It is only when the credit of the same was availed by the assessee such objection came to be raised by the Revenue. In terms of the CENVAT Credit Rules, 2004, an assessee is entitled to avail the full credit of service tax PAID and not the tax payable. Inasmuch the appellant had paid 100% service tax they were entitled to credit of entire tax so paid by them. Reference can also be made to the majority decision in ASIAN COLOUR COATED ISPAT LTD. VERSUS COMMISSIONER OF C. EX., DELHI-III 2014 (9) TMI 974 - CESTAT NEW DELHI where originally, there was difference of opinion between two Members and as per the majority order, it was held that even if no duty was required to be paid on the final product being exempted, the assessee having paid the duty was entitled to the credit of the same. There are no reason to deny the credit of service tax to the appellant - appeal allowed - decided in favor of appellant.
Issues:
1. Interpretation of notification no. 1/2006-ST dated 01.03.2006 regarding service tax payment. 2. Disallowance of credit by the Revenue for excess payment of service tax. 3. Commissioner (Appeals) dismissing the appeal due to lack of evidence from the appellant. 4. Legal issue of entitlement to credit of service tax paid in full. 5. Precedents supporting the appellant's entitlement to full credit of service tax paid. Analysis: 1. The appellant, engaged in manufacturing iron and steel articles, was paying service tax on reverse charge basis for GTA services. They paid 100% service tax instead of availing the benefit of notification no. 1/2006-ST dated 01.03.2006, which required only 25% payment with the balance 75% exempted under certain conditions. 2. The Revenue objected to the excess payment of service tax by the appellant, initiating proceedings resulting in disallowance of credit amounting to ?787,063, along with interest and penalty. The Commissioner (Appeals) rejected the appeal citing the appellant's failure to provide evidence or appear before the original adjudicating authority. 3. The appellate tribunal found that the only issue raised was the excess payment of service tax and credit availed by the appellant. The Commissioner (Appeals) erred in not examining this legal issue without requiring additional evidence. The law states that an assessee cannot be forced to avail conditional exemptions, and the appellant was entitled to full credit of service tax paid under the CENVAT Credit Rules, 2004. 4. Citing settled legal principles, the tribunal referenced the Bombay High Court judgment in Commissioner of Central Excise v. Janiya Enterprises and the majority decision in Asian Colour Coated Ispat Ltd. v. Commissioner of Central Excise, Delhi III. These cases established that even if no duty was required to be paid on the final product due to exemption, the assessee who paid duty was entitled to credit. As the legal issue was clear and settled, the tribunal overturned the impugned order and allowed the appeal. 5. The tribunal concluded that the appellant was entitled to the credit of service tax paid in full, as per established legal principles and precedents. The impugned order disallowing the credit was set aside, and the appeal was allowed.
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