2013 (10) TMI 342 - AT - Service Tax

Tribunal allows appeal on credit reversal for common input services, waives predeposit, grants stay

The Tribunal allowed the applicant's appeal in a case concerning the reversal of credit for common input services used for both taxable and exempted ... Stay application - Service of holiday resorts - Held that:- already the applicant has substantially reversed the disputed credit involved which is sufficient for admission of the appeal considering the legal submissions of both sides. Therefore, predeposit of the balance dues stands waived and its collection stayed during the pendency of the appeals - Stay granted. Issues:1. Reversal of credit for common input services related to taxable and exempted services.2. Treatment of services provided to non-members as taxable or exempted.3. Consideration of goods sold as exempted service for credit reversal calculations.Analysis:1. The applicant, operating holiday resorts, faced disputes regarding the reversal of credit for common input services used for both taxable and exempted services. The Revenue alleged inadequate credit reversal for the financial years 2008-09, 2009-10, and 2010-2011. Show cause notices were issued, resulting in confirmed amounts towards reversal of credit, along with demands for interest and penalties.2. The first issue raised was the treatment of services provided to non-members as either taxable or exempted. Initially treated as exempted services, subsequent Departmental actions and Tribunal directions indicated a shift towards treating these services as taxable. The applicant sought to have these services considered taxable for the purpose of granting a stay.3. The second major issue revolved around the treatment of goods sold, such as wine, foods, and beverages, as exempted services. The Department considered the sale of goods as exempted, while the applicant argued that only the margin of profit involved in trading should be considered for credit reversal calculations. Changes in rules and explanations over the years complicated the matter, with the applicant already having reversed a significant amount, exceeding the required reversal if certain services were treated as taxable.4. The Revenue opposed the applicant's contentions, emphasizing that rules and explanations introduced in later years could not be retroactively applied to the period under consideration. They highlighted potential disadvantages to compliant assesses if such retrospective application were allowed, citing relevant case law and reports from the jurisdictional Commissioner.5. After considering arguments from both sides, the Tribunal found that the applicant had already reversed a substantial amount of disputed credit, deemed sufficient for the admission of the appeal. Consequently, the predeposit of the remaining dues was waived, and the collection stayed during the appeal's pendency, with the stay applications being allowed.