2023 (5) TMI 760 - AT - Service Tax

Reversal of CENVAT Credit - input services and capital goods used for providing both taxable and exempted services - Rule 6(3A) of Cenvat Credit Rules, 2004 - HELD THAT - The appellant has reversed the amount computed under Rule 6(3A) after taking into account Cenvat credit, the fact now disputed by the appellant. This fact is being noted in both the orders. As the appellant has already reversed the amount in excess of what was required to be reversed after treating ocean freight services as not exempted services, there are no reason why to remand this matter for recomputation to the original authority. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand of Rs. 8,10,122/- under Section 73(2) of the Finance Act, 1994.
2. Appropriation of Rs. 23,528/- paid by the appellant against the demand.
3. Recovery of interest under Rule 6(3A)(e) of the Cenvat Credit Rules, 2004.
4. Imposition of penalty under Section 76(1) of the Finance Act, 1994.

Issue-Wise Detailed Analysis:

1. Demand of Rs. 8,10,122/- under Section 73(2) of the Finance Act, 1994:
The appellant was providing both exempted and taxable services during the financial year 2015-16. They availed Cenvat credit on input services and capital goods used for both types of services. The appellant calculated the amount payable under Rule 6(3A) of the Cenvat Credit Rules, 2004, based on the Cenvat credit taken on common input services rather than the total Cenvat credit availed. The revenue contended that the amount payable should have been Rs. 8,10,122/- instead of Rs. 23,528/- paid by the appellant. A show cause notice was issued, and the demand was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals).

2. Appropriation of Rs. 23,528/- paid by the appellant against the demand:
The appellant had already paid Rs. 23,528/- towards the demand. The Assistant Commissioner ordered the appropriation of this amount against the confirmed demand of Rs. 8,10,122/-. The appellant argued that the calculation should be based on common input services, as previously settled by the CESTAT for an earlier period.

3. Recovery of interest under Rule 6(3A)(e) of the Cenvat Credit Rules, 2004:
The Assistant Commissioner ordered the recovery of interest at the applicable rate in terms of Rule 6(3A)(e) of the Cenvat Credit Rules, 2004, read with Rule 14 of the Cenvat Credit Rules, 2004. The appellant contended that the calculation should be based on common input services, and the interest recovery should be adjusted accordingly.

4. Imposition of penalty under Section 76(1) of the Finance Act, 1994:
A penalty of Rs. 81,012/- was imposed under Section 76(1) of the Finance Act, 1994, read with Rule 15(1) of the Cenvat Credit Rules, 2004. The appellant argued that the reversal of credit should be calculated based on common input services, as clarified by the CBEC circular and various judicial decisions.

Tribunal's Decision:
The Tribunal noted that the present order pertains to a continuation of the demand issued for an earlier period, which had been settled in favor of the appellant by the CESTAT. The Tribunal relied on several judicial decisions, including those of Vertiv Energy Pvt Ltd, Arcadia Shipping Ltd, and Reliance Industries Ltd, which clarified that the reversal under Rule 6(3A) should be calculated based on common input services and that the amended provisions have retrospective effect.

The Tribunal observed that the appellant had already reversed the Cenvat credit as per the required calculations, treating ocean freight services as not exempted services. Therefore, there was no need to remand the matter for recomputation. The appeal was allowed, setting aside the incorrect computation by the lower authority.

Conclusion:
The Tribunal allowed the appeal, setting aside the demand, interest recovery, and penalty imposed by the lower authorities. The Tribunal emphasized that the reversal of Cenvat credit should be based on common input services, and the appellant had already complied with this requirement. The decision was pronounced in the open court.

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