2023 (6) TMI 789 - AT - Service Tax

CENVAT Credit - common input service used for taxable as well as exempt goods - mainly case of Revenue is that even though the respondent had paid back the full amount attributed to exempted service along with interest, they are liable to pay 8%/6%/5% of the value of exempted service for the reason that respondent have not maintained separate accounts. HELD THAT - On this issue much water has been flown and in various cases, the Courts and Tribunal held that once the Cenvat credit of the common inputs used in relation to exempted service is reversed along with interest, the demand of 8%/6%/5% in terms of Rule 6(3) will not sustain. The Commissioner has also taken support from one of the land mark judgment in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT wherein it was held that even though the modvat credit was availed but subsequently the same is reversed along with interest situation become as if no Cenvat credit is availed. Accordingly the benefit of notification was extended. Thus, the demand of 8%/6%/5% cannot be made in the facts of the present case when the respondent has admittedly paid back the entire Cenvat credit along with interest which was partly attributed to exempted service - the demand is not sustainable - appeal of Revenue dismissed.

Summary

Issues involved:
The issue in this case is whether the respondent is liable to pay 8%/6%/5% of the value of exempted service for not maintaining separate accounts, despite having paid back the full amount attributed to exempted service along with interest.

Summary:

The appeal was filed by the Revenue against the adjudication order passed by the Commissioner, Central Excise Rajkot. The Revenue argued that the respondent should pay 8%/6%/5% of the value of exempted services as they did not maintain separate accounts for input services used for exempted goods, as per Rule 6(3) of Cenvat Credit Rules, 2004. The Revenue relied on a Bombay High Court judgment to support their position.

Upon hearing the arguments, the Tribunal noted that the respondent had already paid back the entire Cenvat credit availed along with interest, which was partly attributed to exempted service. The Tribunal referenced previous judgments where it was held that once the Cenvat credit of common inputs used for exempted service is reversed along with interest, the demand for 8%/6%/5% under Rule 6(3) is not sustainable. The Tribunal also cited various cases where similar issues were decided in favor of the respondent.

The Tribunal distinguished the judgments relied upon by the Revenue and concluded that the demand for 8%/6%/5% was not applicable in this case. Therefore, the impugned order was upheld, and the Revenue's appeal was dismissed.

In the open court on 19.06.2023, the Tribunal pronounced the decision in favor of the respondent, stating that the demand for 8%/6%/5% was not sustainable given the circumstances where the respondent had already paid back the entire Cenvat credit along with interest attributed to exempted service.