Premature CENVAT credit adjudication set aside where service provider's settlement proceedings were still pending.

Adjudication on CENVAT credit eligibility for service tax paid on input services was premature because the service provider had approached the Settlement Commission and the record did not show the status of that application. The Tribunal held that the credit issue depended on the final outcome of the settlement proceedings, and, if the application was rejected, on any consequent adjudication of the service provider. The adjudication order was therefore set aside and the matter remanded to the original authority for fresh decision after completion of those proceedings.

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Issues: Whether the adjudication on eligibility to CENVAT credit of service tax paid on input services was premature when the service provider had approached the Settlement Commission.

Analysis: The Tribunal noted that the record did not show what had happened to the settlement application and that the effect of the Settlement Commission's decision, or of any subsequent adjudication if the application was rejected, had to be considered before deciding the credit issue. It held that the proper course was to await completion of the proceedings concerning the service provider, since the credit question depended on the final outcome of those proceedings.

Conclusion: The adjudication order was held to be premature and the matter was remanded to the original adjudicating authority for fresh adjudication after the Settlement Commission proceedings, and any consequent adjudication of the service provider, were completed.

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