2024 (7) TMI 383 - AT - Service Tax

CENVAT Credit - common input services used for the dutiable and traded goods - contravention of sub-rules (1), (2) and (3) of Rule 6 of CENVAT Credit Rules, 2004 - HELD THAT - It is found that a pure question of law for which no enquiry or proof is required can be raised at any stage. The Hon ble Apex Court in STATE OF MADRAS AND ANOTHER VERSUS K.M. RAJAGOPALAN 1955 (9) TMI 71 - SUPREME COURT , had recognized that a pure question of law can be urged at any point of time before any forum provided it does not require any further adjudication of any disputed fact. Moreover the Tax Research Unit of the Ministry of Finance s letter, D.O.F. No 334/1/2012-TRU Dated March 16, 2012 by Jt. Secretary (TRU), states that Rule 6(6A) of the Cenvat Credit rules, introduced vide Notification 3/2011-CE (NT), dated 01/03/2011, is being given effect from February 10, 2006. This being so Cenvat Credit was not required to be reversed for the supply of taxable service without payment of tax to SEZ. The letter itself states that retrospective effect was meant to neutralize the investigations or demands for reversal of credits in respect of services provided to SEZs for the past. A benefit which is being given from a retrospective date to remove some lacunae that has crept in must be given effect to when claimed. The Ld. Commissioner Appeals erred in this regard. The impugned order which upheld the order of the Lower Authority hence merits to be set aside - the impugned order set aside - appeal allowed.

Issues:
1. Availment of CENVAT credit against tax on common input services.
2. Failure to maintain separate accounts for dutiable and traded goods.
3. Demand of service tax, interest, and penalties.
4. Appeal against the lower authority's decision.
5. Interpretation of Notification No. 3/2011-CE(NT) dated 01/03/2011.
6. Legal plea raised for the first time at the appeal stage.
7. Application of Rule 6(6A) of the CENVAT Credit Rules.
8. Reversal of CENVAT credit for services provided to SEZs.
9. Applicability of retrospective effect from February 10, 2006.
10. Error in the Commissioner Appeals' decision.

Detailed Analysis:
1. The appellant availed CENVAT credit against tax paid on common input services for both taxable and exempted services, leading to a demand for service tax, interest, and penalties under Rule 6 of CENVAT Credit Rules, 2004. The appellant failed to maintain separate accounts for these services, contravening the rules.

2. The appellant appealed against the lower authority's decision confirming the demand and penalties. The Commissioner (Appeals) upheld the decision, leading to the appeal before the Tribunal.

3. The main contention was the interpretation of Notification No. 3/2011-CE(NT) dated 01/03/2011, which exempted the reversal of CENVAT credit for services provided to SEZs without tax payment. The appellant argued that this notification should apply retrospectively from February 10, 2006, and claimed the benefit under this notification.

4. The appellant raised a legal plea for the first time at the appeal stage, citing relevant case laws and the Explanatory note issued under D.O.F. No 334/1/2012-TRU. The appellant argued that the lower authorities failed to consider the retrospective application of Rule 6(6A) of the CENVAT Credit Rules.

5. The Tribunal, after hearing both parties, concluded that a pure question of law can be raised at any stage and that the retrospective effect of the notification should be honored when claimed. The Tribunal found errors in the Commissioner Appeals' decision and set aside the impugned order, allowing the appeal and granting the appellant consequential relief as per law.

6. The Tribunal's decision was based on the interpretation of legal provisions, notifications, and precedents, emphasizing the importance of correctly applying the law to ensure fair treatment for taxpayers.

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