Reversal of common input service credit with interest was treated as sufficient compliance, defeating Rule 6(3) liability.

Reversal of the entire common input service credit with interest was treated as sufficient compliance where taxable and exempted services were provided without separate records. On that basis, the Tribunal applied its earlier view that such reversal is equivalent to non-availment of credit, so the percentage payment prescribed under Rule 6(3) of the Cenvat Credit Rules was not attracted. A strong prima facie case was therefore shown for interim relief, and the appellant obtained waiver of pre-deposit and stay of recovery.

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Issues: Whether reversal of the entire common input service credit with interest amounts to sufficient compliance so as to deny application of Rule 6(3) of the Cenvat Credit Rules, and whether the appellant was entitled to waiver of pre-deposit and stay of recovery.

Analysis: The disputed demand rested on the premise that, where taxable and exempted services are provided and separate records are not maintained, the assessee must pay the stipulated percentage under Rule 6(3). The appellant showed that the entire credit taken on common input services had already been reversed along with interest. The Tribunal relied on its earlier view that such reversal is equivalent to non-availment of credit and therefore the penal consequence under Rule 6(3) does not arise. On that basis, a strong prima facie case for interim relief was made out.

Conclusion: The appellant was entitled to waiver of pre-deposit and stay of recovery; the issue was decided in favour of the assessee.

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