Accumulated CENVAT credit can be used for service tax on exempted services when no credit is taken for inputs used in that service.

Accumulated CENVAT credit may be used to discharge service tax on services covered by Notification No. 1/2006-ST, so long as no credit is taken for the inputs, capital goods or input services used for the exempted or abated service itself. The Tribunal's earlier view was followed that the notification bars credit only in relation to the very service for which exemption or abatement is claimed, and does not prohibit utilisation of brought-forward credit from earlier periods or from other services. A contrary Revenue decision was distinguished on materially different facts, and the denial of credit was set aside.

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Issues: Whether accumulated CENVAT credit could be utilised for payment of service tax on services availing the benefit of Notification No. 1/2006-ST, where no credit was taken on the inputs, capital goods or input services used for those services.

Analysis: The Tribunal followed its earlier decisions holding that the notification only prohibits taking CENVAT credit in respect of the service for which exemption or abatement is claimed, and does not impose any prohibition on using accumulated credit brought forward from earlier periods or from other services. The Tribunal also distinguished the contrary decision relied upon by the Revenue on the basis that the facts were materially different.

Conclusion: The utilisation of accumulated CENVAT credit was held to be permissible, and the denial of credit was set aside in favour of the appellant.

Ratio Decidendi: In the absence of an express prohibition in the exemption notification, accumulated CENVAT credit may be used to discharge service tax liability on a different service, provided no credit is taken for the inputs or input services relating to the exempted service itself.

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