2014 (11) TMI 712 - AT - Service Tax

Appellate tribunal upholds challenge on service tax demand appeal, stresses importance of credit reversal

CENTRAL WAREHOUSING CORPORATION Versus COMMISSIONER OF SERVICE TAX, RAIGAD

The appellate tribunal addressed an appeal against a service tax demand confirmation with penalties under various sections of the Finance Act, 1994. The ... Reversal of CENVAT Credit - Non maintenance of separate accounts - benefit of Notification 1/2006-ST dated 01/03/2006 - Penalty u/s 76, 77 & 78 - Held that:- From the records it is seen that the appellant has been filing the details of the reversals made by them indicating therein the details of the total credit taken, the value of the exempted services, value of the total output services including the value of the taxable and exempted services and other relevant particulars. From these parameters, the CENVAT credit attributable to exempted services can be easily determined in terms of the formula prescribed under Rule 6(3A). If certain details were lacking, the department could have directed the appellant to furnish those details to satisfy that the credit reversal has been done in accordance with the said formula. From the records of the case, it is seen that the department has not undertaken any such exercise nor have they given any finding as to whether the reversal made by the appellant is in conformity with sub-rule (3A) or not. In the absence of such a finding, the impugned order is clearly not sustainable in law. Matter remanded back - Decided in favour of assessee. Issues:1. Service tax demand confirmation with penalties under various sections.2. Reversal of credit for exempted services and compliance with Notification 1/2006-ST.3. Interpretation of Rule 6(3A) of the CENVAT Credit Rules.4. Lack of details in reversal submission and sustainability of the impugned order.Issue 1: Service tax demand confirmation with penalties under various sectionsThe appellate tribunal addressed an appeal against Order-in-Original confirming a service tax demand of Rs. 14,06,96,769 along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant contested the order.Issue 2: Reversal of credit for exempted services and compliance with Notification 1/2006-STThe appellant claimed to follow Rule 6(3A) of the CENVAT Credit Rules for reversing credit taken on exempted output services. The Revenue contended that the appellant did not maintain separate records for credit attributable to taxable and exempted services, thus violating Notification 1/2006-ST. The appellant argued that reversal of credit equates to non-availment, citing legal precedents supporting this view.Issue 3: Interpretation of Rule 6(3A) of the CENVAT Credit RulesThe tribunal analyzed Rule 6(3)(i) and (ii) along with Rule 6(3A) of the CENVAT Credit Rules, emphasizing the provisional monthly reversal of credit and finalization at year-end. Legal decisions cited by the appellant confirmed that proper credit reversal fulfills the non-availment condition for exemptions.Issue 4: Lack of details in reversal submission and sustainability of the impugned orderThe Revenue argued that the appellant failed to provide sufficient details of credit reversals, leading to a lack of satisfaction regarding non-availment of credit. The tribunal found that the department did not assess if the appellant's reversals complied with Rule 6(3A). Consequently, the tribunal remanded the matter to the adjudicating authority to scrutinize the reversal details submitted by the appellant and ensure compliance with the prescribed formula. The tribunal directed the authority to quantify any additional reversal required and extend the benefit of Notification 1/2006 to the appellant upon compliance.In conclusion, the tribunal allowed the appeal by remand, disposed of the stay petition, and dismissed the department's application for early hearing as the appeal had been conclusively resolved.