Appellant not liable to reverse service tax credit on input services per Tribunal decision.

The Tribunal held that the appellant was not required to reverse service tax credit on input services when inputs were removed from the factory. As there were no specific provisions for reversing service tax credit on input services, unlike for inputs or capital goods, the demand for service tax credit on input services was deemed unsustainable. Therefore, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.

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Issues:

1. Whether the appellant is required to reverse the service tax credit when inputs are removed from the factoryRs.

Analysis:

The appellant, engaged in manufacturing PVC pipes, availed cenvat credit for PVC raisins used in production and service tax paid on GTA and Commission Agent services. The dispute arose when the appellant removed PVC raisins from the factory, reversing cenvat credit for the inputs but not for the input services. The Department demanded service tax for the services not reversed. The Adjudication Order confirmed the demand, upheld by the Commissioner (Appeals), leading to the current appeal before the Tribunal.

The key question was whether the appellant must reverse service tax credit when inputs are removed from the factory. Rule 3(5) of the Cenvat Credit Rules mandates paying an amount equal to the credit availed for inputs or capital goods removed from the factory. However, this rule does not explicitly require reversing credit for input services. As there are no provisions for reversing service tax credit on input services similar to those for inputs or capital goods, the Tribunal held that the demand for service tax credit on input services was not sustainable. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

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