Tribunal Rules in Favor of MIAPL on Service Tax Adjustment Issue

The Tribunal found in favor of M/s. Mumbai International Airport Pvt. Ltd. (MIAPL) regarding the adjustment of excess Service Tax demand paid under protest. The appellant's adjustment of the excess tax against their tax liability was deemed lawful. The department was directed to verify the amount adjusted and stated that if no Service Tax was due, then no penalty would apply. Additionally, the demand related to excess Cenvat credit availed on input services was ruled unsustainable in law. The Tribunal allowed recovery of interest only on the excess credit utilized before 1-4-2008 and remanded the matter for fresh consideration by the adjudicating authority.

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Issues:
1. Adjustment of excess Service Tax demand paid under protest.
2. Demand related to excess Cenvat credit availed on input services.

Analysis:

Issue 1: Adjustment of excess Service Tax demand paid under protest
The appellant, M/s. Mumbai International Airport Pvt. Ltd. (MIAPL), had paid Service Tax under protest for leasing part of premises to clients during May 2006 to Feb 2007. Upon seeking clarification from the department, they were informed that Service Tax was not payable on rentals/lease charges by the Airport Operator as per Circular No. 80/10/2004-S.T. The appellant adjusted the excess Service Tax paid under protest against the tax liability for January-March 2007, in line with Rule 6(3) of the Service Tax Rules, 1994. The Tribunal found that the adjustment made by the appellant was in accordance with the law. The department was directed to verify if the amount adjusted was indeed the excess tax paid by the appellant. If found that no Service Tax was due, then the penalty would not apply.

Issue 2: Demand related to excess Cenvat credit availed on input services
The appellant had availed excess Cenvat credit of Rs. 1,41,15,163/- on input services, exceeding the 20% cap as per Rule 6(3)(c) of the Cenvat Credit Rules, 2004. The Tribunal referred to a clarification by the C.B.E. & C. in Circular No. 137/12/2008-CX.4, stating that utilization of accumulated credit on account of the 20% cap was permissible from 1-4-2008. Therefore, the demand for the excess Cenvat credit was deemed not sustainable in law. The Tribunal ruled that only interest on the amount of excess credit utilized prior to 1-4-2008 could be recovered from the appellant. The matter was remanded back to the adjudicating authority for fresh consideration in light of the Board's clarification and the relevant provisions of the Service Tax Rules, 1994, ensuring the appellant's right to be heard before a new decision is made.

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