2016 (6) TMI 198 - AT - Service Tax

Tribunal Allows Service Tax Exemption for Timely Credit Reversal

M/s Detect Electronics Versus Commissioner of Central Excise, Aurangabad

The Tribunal set aside the Order-in-Original demanding differential Service Tax liability from the appellant for services provided during 2006-07 to ... Availing Cenvat Credit while availing benefit of abatement notification - services of erection, commissioning or installation service - period 2006-07 to 2008-09 by availing benefit of Notification No. 1/2006-ST dated 01.03.2006 - appellant had not satisfied the condition of Notification No. 1/2006-ST, in as much they claim abatement of 67% of the taxable value despite availing the CENVAT credit on the few input and inputs services. Held that:- the appellant had reversed that entire CENVAT credit so availed before the adjudication order. Therefore, the reversal made before the adjudication order is as good as non- availment of credit, which is supported by the judgment of Hon'ble Supreme Court in the case of Precot Meridian Ltd. [2015 (11) TMI 323 - SUPREME COURT]. The impugned order is unsustainable and liable to be set aside. - Decided in favour of appellant with consequential relief Issues involved:Demand of differential Service Tax liability based on Notification No. 1/2006-ST for services provided during 2006-07 to 2008-09; Availment of CENVAT credit on inputs and input services affecting the abatement of 67% on taxable value; Eligibility for exemption under Notification No. 1/2006-ST due to reversal of entire CENVAT credit before adjudication order.Analysis:The appeal in question challenges Order-in-Original No. 14/ST/Commr./2011, which demanded differential Service Tax liability from the appellant for services provided during 2006-07 to 2008-09. The issue revolves around the appellant's compliance with Notification No. 1/2006-ST, specifically regarding the abatement of 67% on the taxable value despite availing CENVAT credit on certain inputs and input services. The adjudicating authority found the appellant liable for Service Tax along with interest and penalties due to not meeting the conditions of the notification.The appellant argued that they reversed the entire CENVAT credit availed during the period, making them eligible under Notification No. 1/2006-ST. They cited the decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise & Customs Vs. Precot Meridian Ltd. to support their position. On the other hand, the Departmental Representative reiterated the findings, emphasizing that the exemption notification must be adhered to in its entirety, and the appellant availed the 67% abatement under the notification. They relied on judgments like Kartar Rolling Mills Vs. Commissioner of Central Excise, New Delhi and Collector of Customs Vs. Malwa Industries Limited.After considering both sides' submissions, the Tribunal found the issue to be narrow. The appellant had availed the abatement under Notification No. 1/2006-ST but was denied due to availing CENVAT credit on inputs and input services. However, the Tribunal noted that the appellant had reversed the entire CENVAT credit before the adjudication order, effectively nullifying the credit availed. Citing the judgment in the case of Precot Meridian Ltd., the Tribunal upheld that the reversal made before adjudication was equivalent to non-availment of credit, thus supporting the appellant's eligibility for the exemption. Consequently, the Tribunal set aside the impugned order and allowed the appeal with any consequential relief.In conclusion, the judgment highlights the importance of strict compliance with exemption notification conditions and the significance of timely reversal of credits to establish eligibility for exemptions under Service Tax regulations. The decision underscores the legal principles established in relevant case laws and emphasizes the Tribunal's adherence to precedent-setting judgments in resolving tax liability disputes.