2024 (10) TMI 52 - AT - Service Tax

CENVAT Credit - rejection on the ground that credit availed were not relating to provision of service and therefore confirmed the demand - revenue neutrality - HELD THAT - When it is found that after reconciliation between the availment of the Cenvat credit under the both registration i.e. Service Tax and Central Excise, if the payment of duty equal to the Cenvat credit availed under the service tax registration which pertains to the manufacturing unit is more than disputed service tax credit, the situation will be Revenue neutral. During the denovo adjudication, the appellant have submitted the reconciliation statement to the adjudicating authority and adjudicating authority has not disputed the said reconciliation, according to which there is a payment from PLA in manufacturing unit more than the disputed service tax availed in the service tax registration. As observed by this Tribunal in the remand order dated 09.04.2014, the entire situation admittedly being a Revenue neutral the demand cannot be sustained except an amount of Rs.18,00,000/- which appellant have reversed as per the direction of this Tribunal and they are not disputing this amount. Therefore, the Cenvat credit of Rs.18,00,000/- reversed by the appellant is maintained. Being a revenue neutral situation, the demand confirmed in the impugned order is not sustainable - the impugned order is set aside, the appeal is allowed.

Summary

Issues:
- Dispute regarding availing of input service credit under service tax registration
- Reconciliation of payment of duties at two registered units
- Revenue neutral situation

Analysis:
The case involved a manufacturer and service provider who registered separately with the Central Excise department for manufacturing and the service tax department for service provision. The appellant believed that input service credit should be availed under the service tax registration and input goods credit under manufacturing registration. However, the dispute arose when the Ld. Commissioner rejected the credit availed under service tax registration, leading to a demand confirmation. The appellant submitted entry-wise bifurcation of credit, supported by a Chartered Accountant certificate, to show a revenue-neutral situation. Upon remand by the Tribunal, the adjudicating authority once again confirmed the demand, prompting the appellant to file the present appeal.

During the appeal, the appellant argued that despite providing detailed entries and a Chartered Accountant certificate, the adjudicating authority rejected the evidence. The appellant contended that the excise duty paid in cash at the manufacturing unit exceeded the credit availed at the service tax registration, resulting in a revenue-neutral scenario. The Revenue, represented by the Superintendent, reiterated the findings of the impugned order, leading to a detailed consideration by the Tribunal.

In the earlier round of the appeal, the Tribunal observed the need for reconciliation of duties paid at both registered units to determine the revenue neutrality. The Tribunal directed the appellant to reverse a specific Cenvat credit amount and reconcile duty payments at the units. In the subsequent denovo adjudication, the appellant provided a reconciliation statement, showing a payment from PLA at the manufacturing unit exceeding the disputed service tax credit. The Tribunal, based on the reconciliation and previous observations, concluded that the situation was revenue neutral, except for the reversed Cenvat credit amount, which was upheld.

Ultimately, the Tribunal found the demand in the impugned order unsustainable due to the revenue-neutral situation. Consequently, the impugned order was set aside, and the appeal was allowed, with the decision pronounced in open court on a specified date.