Tribunal grants appellant benefit of Notification No.1/2006-ST on Cenvat credit reversal

The Tribunal ruled in favor of the appellant in a case concerning entitlement to the benefit of Notification No.1/2006-ST upon reversal of Cenvat credit and liability for interest on delayed service tax payments. The appellant's reversal of Cenvat credit was deemed equivalent to non-availment, entitling them to the notification's benefit. Additionally, the Tribunal held that the date of presentation of the cheque for service tax payment should be considered the date of payment, absolving the appellant from liability for interest on delayed payments. The impugned order was set aside, and the appeal was allowed with consequential relief.

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Issues Involved:
1. Entitlement to the benefit of Notification No.1/2006-ST upon reversal of Cenvat credit.
2. Liability to pay interest for delayed payment of service tax as per Rule 6(2A) of Service Tax Rules, 1994.

Issue-wise Detailed Analysis:

1. Entitlement to the Benefit of Notification No.1/2006-ST:

The appellant, a tour operator, availed Cenvat credit on input services during the period of April 2006 to March 2007 while also claiming the benefit of Notification No.1/2006-ST. This notification provided an exemption from service tax but was not applicable if the assessee availed Cenvat credit on inputs or capital goods. Upon realizing the ineligibility to claim the notification's benefit while availing Cenvat credit, the appellant reversed the Cenvat credit along with interest and informed the department. Despite this, the Revenue issued Show Cause Notices to deny the benefit of the notification and demanded service tax along with interest and penalties.

The Tribunal examined the case in light of the decision in *Chandrapur Magnet Wires (P) Ltd. vs. Collector of Central Excise, Nagpur* and the subsequent interpretation by the Hon'ble Allahabad High Court in *Hello Minerals Water (P) Ltd. vs. Union of India*. It was established that the reversal of Cenvat credit amounts to non-availment of credit, thereby entitling the appellant to the benefit of the notification. The Tribunal also referred to its own decision in *Khyati Tours & Travels vs. CCE, Ahmedabad*, which supported the appellant's claim.

The Tribunal concluded that the appellant's reversal of Cenvat credit, upon realization of ineligibility, amounts to non-availment of the credit. Consequently, the appellant was entitled to the benefit of Notification No.1/2006-ST. The demand for service tax, interest, and penalties was set aside.

2. Liability to Pay Interest for Delayed Payment of Service Tax:

The appellant contended that as per Rule 6(2A) of the Service Tax Rules, 1994, the date of presentation of the cheque for service tax payment should be deemed the date of payment, subject to the realization of the cheque. The appellant had deposited the service tax via cheque on the due dates, which was realized later.

The Tribunal upheld this contention, stating that the date of cheque presentation is considered the date of service tax payment as per Rule 6(2A). Therefore, the appellant had paid the service tax on time, and the demand for interest on delayed payments was not sustainable.

Conclusion:

Both issues were resolved in favor of the appellant. The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The reversal of Cenvat credit was deemed equivalent to non-availment, thus entitling the appellant to the benefit of Notification No.1/2006-ST. Additionally, the appellant was not liable to pay interest for delayed service tax payments, as the payments were made on time per Rule 6(2A) of the Service Tax Rules, 1994.

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