2013 (9) TMI 183 - AT - Service Tax

Tribunal grants CENVAT credit to appellant for services to SEZ units under amended Rule 6

TATA CONSULTING ENGINEERS LTD Versus COMMISSIONER OF SERVICE TAX, MUMBAI

The Tribunal ruled in favor of the appellant, holding that they were entitled to CENVAT credit for inputs used in providing services to SEZ units or ... Demand of service tax - Consulting Engineers Services rendered to SEZ- appellant was providing both taxable and exempted service and was not maintaining separate accounts for the CENVAT credit availed - appellant contended that they had rendered the exempted service to units in SEZ which was deemed as exports – Held that:- The adjudicating authority has completely failed to examine the claim of the appellant - service provided to SEZ have been excluded from the scope of the Rule 6 of the CENVAT Credit Rules, 2004 vide Notification NO. 3/2001-CE (NT) dated 01/03/2011 - notification was given retrospective effect vide Section 144 of the Finance Act, 2012 with effect from 10/02/2006 to 28/02/2011 - there was no need for the assessee to reverse any credit taken on the inputs/input services in respect of which credit was availed for rendering of output services to SEZ units/SEZ developer - adjudicating authority has completely failed to examine the claim of the appellant – as decided in Repro India Ltd., Vs. UOI,( 2007 (12) TMI 209 - BOMBAY HIGH COURT) – appeal decided in the favour of assessee. Issues:- Liability to pay service tax on exempted services provided without maintaining separate accounts- Applicability of Rule 14 of the CENVAT Credit Rules, 2004- Claim of exemption under Notification No. 3/2001-CE (NT) dated 01/03/2011- Failure of the adjudicating authority to consider the appellant's claim- Interpretation of Rule 6 of the CENVAT Credit Rules, 2004 in relation to services provided to SEZ units- Legal precedent supporting the appellant's claimAnalysis:1. The appeal challenged an order demanding service tax for providing both taxable and exempted services without maintaining separate accounts for CENVAT credit availed. The appellant contended that services provided to SEZ units were excluded from the scope of Rule 6 of the CENVAT Credit Rules, 2004, as per Notification No. 3/2001-CE (NT) dated 01/03/2011, which had retrospective effect. The adjudicating authority upheld the demand and imposed penalties, leading the appellant to appeal.2. The appellant argued that as per the amended Rule 6, they were not required to reverse any CENVAT Credit for services rendered to SEZ units. They cited legal precedents to support their claim, emphasizing the retrospective effect of the rule amendment from 10/02/2006 to 28/02/2011. The appellant's counsel highlighted that the impugned order was not sustainable in law due to the exemption provided under the amended Rule 6.3. The Tribunal noted that the appellant had indeed provided services to SEZ units and developers during the relevant period, with details reflected in their filed returns. The amendment to Rule 6 via Notification No. 3/2011 exempted the appellant from reversing CENVAT credit for inputs used in rendering services to SEZ units. The Tribunal found that the adjudicating authority failed to consider the appellant's claim and held that the impugned order was legally unsustainable.4. Additionally, the Tribunal referenced a judgment by the Hon'ble High Court of Bombay in Repro India Ltd., which clarified that Rule 6 exceptions applied to exports, including supplies to SEZ units. The Tribunal concluded that the appellant was entitled to CENVAT credit for inputs used in providing services to SEZ units or developers. Consequently, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief as necessary.