CENVAT credit reversed before adjudication can count as non-availment, preserving exemption under the service tax notification.

Reversal of the entire CENVAT credit before adjudication was treated as equivalent to non-availment of credit, preserving entitlement to abatement under Notification No. 1/2006-ST for erection, commissioning or installation services. The article applies the principle that where wrongly availed credit is fully reversed before final adjudication, the exemption condition is not defeated, following the Supreme Court view in Precot Meridian Ltd. On that basis, the benefit of the notification remained available and the related demand, interest, and penalties could not be sustained.

---

---

Issues: Whether reversal of the entire CENVAT credit before adjudication could be treated as non-availment of credit so as to preserve entitlement to abatement under Notification No. 1/2006-ST.

Analysis: The assessee had taken abatement under Notification No. 1/2006-ST for erection, commissioning or installation services, but the benefit was denied on the ground that CENVAT credit on inputs and input services had been availed during the relevant period. It was undisputed that the entire credit was reversed before the adjudication order. Such reversal was treated as equivalent to non-availment of credit, and the principle was supported by the Supreme Court ruling in Precot Meridian Ltd., which held that credit refunded or reversed before final adjudication does not defeat exemption when the condition is otherwise satisfied.

Conclusion: The assessee was entitled to the benefit of the notification and the demand, interest, and penalties could not be sustained.

Ratio Decidendi: Reversal of wrongly availed CENVAT credit before adjudication is to be treated as non-availment for the purpose of satisfying the condition of an exemption notification.

---