2018 (1) TMI 1089 - AT - Service Tax

Appeal allowed citing Rule 6 compliance for Cenvat Credit. Unjust demand overturned. Legal principles upheld.

M/s Compucom Software Ltd. Versus CST, Jaipur

M/s Compucom Software Ltd. Versus CST, Jaipur - TMI Issues:Application of Rule 6 of the Cenvat Credit Rules, 2004 regarding maintaining separate accounts for input services used in taxable and exempted output services.Analysis:The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise (Appeals), Jaipur, for the period from April 2007 to March 2008. The dispute centered around the application of Rule 6 of the Cenvat Credit Rules, 2004, which required maintaining separate accounts for input services used in taxable and exempted output services. The assessee had availed Cenvat Credit on input services common to both types of output services without segregating them. Consequently, proceedings were initiated to demand 8% of the value of exempted services under Rule 6(3)(ii). The original authority upheld the demand and imposed penalties.During the hearing, the counsel for the assessee acknowledged the non-compliance with Rule 6 but highlighted that upon being informed, the assessee reversed the credit availed on input services attributable to exempted output services, as required by the rule. The counsel referred to legal precedents, including decisions by the Hon'ble Supreme Court and High Courts, to support the contention that the reversal of credit with interest amounted to non-availing of Cenvat credit to that extent. The Department, however, contended that separate accounts should have been maintained from the outset.After considering the arguments and reviewing the facts, the Tribunal noted that the assessee had indeed reversed the credit with interest for input services used in exempted output services. The Tribunal observed that this issue had been addressed in previous cases, and the reversal of credit needed verification by the original authority. Following the precedents set by the Hon'ble Supreme Court and High Courts, and recent Tribunal decisions, the demand for 8% of the value of exempted services was deemed unjustified. Therefore, the appeal was allowed, subject to verification of the credit reversal in line with legal principles and precedents cited.In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the importance of complying with Rule 6 of the Cenvat Credit Rules, 2004, and the necessity for proper verification of credit reversals in line with established legal interpretations.