Tribunal rules in favor of appellant on service tax credit reversal

The Tribunal held in favor of the appellant, ruling that the reversal of the credit of service tax taken in their books of accounts for cenvat credit was justified. The show cause notice invoking the extended period and alleging suppression of facts was deemed invalid. The Tribunal found the appellant's actions to be revenue neutral and in accordance with relevant decisions. It was determined that the appellant was entitled to take the credit of the amount paid towards service tax, with the exercise being considered revenue neutral. As a result, the impugned order was set aside, granting relief to the appellants.

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Issues:
1. Whether the appellant correctly reversed the credit of service tax taken in their books of accounts for cenvat credit.
2. Whether the show cause notice invoking the extended period and alleging suppression of facts was valid.
3. Whether the appellant was entitled to take the credit of the amount paid towards service tax.

Analysis:

1. The appellant had initially credited the cenvat account with service tax and education cess, which was later reversed upon realizing that the amount was not payable. The appellant also took credit for service tax paid towards foreign commission agents. The show cause notice was issued, contending that the appellant should have filed a refund claim instead of reversing the credit. The Tribunal found that the appellant's actions were revenue neutral as the amount paid was available as credit. The Tribunal cited decisions supporting the appellant's belief that rectifying the entry was in order.

2. The Tribunal held that it was not necessary to delve into the merits of the case due to the show cause notice being issued invoking the extended period and alleging suppression of facts. After considering the arguments and records, the Tribunal concluded that the extended period should not have been invoked. The appellant's belief in regularizing the entry through reversal was considered bonafide, and the Tribunal found no reason for suppression of facts or misdeclaration.

3. The Tribunal determined that the appellant was entitled to take the credit of the amount paid towards service tax as a recipient of service. The Revenue did not question this credit taken by the appellant. The Tribunal emphasized that the exercise of payment and availing credit was revenue neutral. Since the situation was revenue neutral even before the debit/credit transactions in the cenvat credit accounts, the extended period for demanding the reversal of cenvat credit was deemed unsustainable. Consequently, the impugned order was set aside, providing relief to the appellants.

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