Reversal of Cenvat credit treated as non-availment, preserving abatement eligibility under the service tax notification.

Reversal of proportionate Cenvat credit on input services, together with interest, was treated as restoring the assessee to the position of non-availment for purposes of an abatement condition requiring that credit not be taken. The Tribunal relied on prior authority recognising such reversal as equivalent to not having availed credit, and distinguished the Revenue's cited precedent because it concerned a different factual situation where credit had lapsed for unrelated reasons. On that basis, the notified abatement remained available and the service tax demand could not be sustained.

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Issues: Whether the assessee remained entitled to the notified abatement despite having taken and subsequently reversed proportionate Cenvat credit on input services.

Analysis: The abatements under the relevant service tax notifications were denied on the premise that credit had been availed. The Tribunal held that reversal of proportionate credit, along with interest, put the assessee in the same position as if credit had not been taken, and relied on prior authority recognising such reversal as equivalent to non-availment. The contrary precedent cited by the Revenue was distinguished on facts, as it involved a different situation where the credit had lapsed for reasons unrelated to reversal.

Conclusion: The assessee was entitled to the abatement, and the service tax demand was unsustainable.

Ratio Decidendi: Reversal of proportionate Cenvat credit amounts to non-availment of credit for the purpose of claiming an abatement condition tied to non-taking of credit.

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