2014 (4) TMI 444 - AT - Service Tax

Appellant prevails in CENVAT Credit dispute, meets Rule 6 requirements, secures reversal for exempted services.

The appellant successfully challenged the denial of CENVAT Credit on courier services by demonstrating compliance with Rule 6(3)(c) of the CENVAT Credit ... Cenvat Credit - Restriction on utilizing the credit upto 20% - Rule 6(3) - Commercial training and coaching services - Exempted activities i.e. documents, applications etc -Held that:- if the provider of the output service avails CENVAT Credit of common input services, then he can utilize only the amount as specified under Rule 6(3)(c). In the case in hand, it is also undisputed that the appellant utilizes the services of courier for his entire business activity. It is also undisputed that the appellant is discharging the Service Tax on the services i.e. commercial coaching services. If that be so, the provisions as reproduced hereinabove would mandate that the appellant is eligible to avail the CENVAT Credit but can utilize only 20% of the same for paying the Service Tax liability on the services rendered by him. In the entire case record, there is no allegation or finding which indicate that the amount which has been confirmed by the lower authorities is the amount which has been utilized by the appellant more than the stipulated 20% under Rule 6(3)(c). In the facts & circumstances of this case, I am of the considered view that entire CENVAT Credit on the common input services i.e. courier services cannot be denied to the appellant - Decided in favour of assessee. Issues:- Availment of CENVAT Credit on courier services- Interpretation of Rule 6(3)(c) of CENVAT Credit Rules, 2004- Proportionate CENVAT Credit reversal for exempted servicesAnalysis:Issue 1: Availment of CENVAT Credit on courier servicesThe case revolved around the appellant availing CENVAT Credit on courier services during the period from December 2003 to September 2008. The authorities raised concerns regarding the eligibility of the appellant to claim this credit since the courier services were used for non-taxable activities. Both lower authorities held the appellant liable to repay the entire Service Tax credit availed, along with penalties and interest. However, upon review, it was found that the appellant utilized courier services for their entire business activity, including providing taxable commercial coaching services. As per Rule 6(3)(c) of the CENVAT Credit Rules, 2004, the appellant could only utilize 20% of the CENVAT Credit for paying the Service Tax liability on taxable output services. Since there was no evidence suggesting the appellant exceeded this limit, the denial of the entire CENVAT Credit was deemed unjustified.Issue 2: Interpretation of Rule 6(3)(c) of CENVAT Credit Rules, 2004The judgment emphasized the importance of Rule 6(3)(c) in regulating the utilization of CENVAT Credit on common input services. It clarified that providers of output services, like the appellant, could only use a specified percentage of the credit for paying Service Tax on taxable output services. In this case, the appellant's compliance with this rule was crucial in determining the validity of the CENVAT Credit availed on courier services. The judgment highlighted that the appellant's adherence to the 20% limit for utilizing the credit supported their eligibility to retain the credit amount, as no evidence suggested a breach of this statutory provision.Issue 3: Proportionate CENVAT Credit reversal for exempted servicesFurthermore, the judgment referenced a retrospective amendment in the Finance Act, 2010, which introduced provisions for the reversal of proportionate CENVAT Credit related to exempted services. The appellant had already reversed the proportionate credit attributable to services classified as non-taxable, as confirmed by their counsel. This action aligned with the legislative changes and demonstrated the appellant's compliance with the revised rules. Consequently, the appellant's proactive reversal of the proportionate credit further strengthened their case for retaining the CENVAT Credit on courier services. The judgment concluded that the impugned order was unjust and ruled in favor of the appellant, setting aside the previous decision and allowing the appeal.This detailed analysis of the judgment highlights the critical legal interpretations and factual considerations that influenced the decision in favor of the appellant regarding the availment of CENVAT Credit on courier services and compliance with relevant provisions.