Tribunal overturns service tax demand and cenvat credit denial, ruling in favor of appellant.

The Tribunal ruled in favor of the appellant on both issues. Regarding the proper determination of service tax liability, the Tribunal set aside the demand, stating that the appellant correctly paid service tax based on the 15% value, as supported by previous orders and relevant rules. Concerning the denial of cenvat credit, the Tribunal found the denial unfounded as the appellants had not availed the abatement notification, making them eligible for the credit. Ultimately, the Tribunal overturned the service tax demand and the denial of cenvat credit.

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Issues:
1. Proper determination of service tax liability on the supply and erection of lifts / elevators.
2. Denial of cenvat credit on input services related to works contract services.

Analysis:

Issue 1: Proper determination of service tax liability
The case involved the appellants paying service tax on erection, commissioning, or installation services based on a notional value of 15% of the gross amount realized for the supply and erection of lifts/escalators. The department issued a show cause notice alleging short payment of service tax, proposing recovery along with interest and penalties. The appellant contended that they were following a previous order and Tamil Nadu Value Added Tax Rules, 2007, which specified the service portion as 15% of the total contract value. The Tribunal's earlier decision supported the appellant's method of payment, emphasizing that the value on which VAT was paid should not be subjected to levy of service tax again. The Tribunal also referenced relevant rules and case law to support the appellant's position. Ultimately, the Tribunal set aside the demand, stating that the appellant had discharged service tax correctly based on the 15% value, and the demand was unsustainable.

Issue 2: Denial of cenvat credit
The denial of cenvat credit amounting to Rs. 21,29,886/- was based on the argument that if abatement of 67% was allowed as per Notification No.1/2006-ST, such credit would not be eligible. However, since the appellants did not avail the benefit of this notification, the denial of cenvat credit was deemed to be without basis. The Tribunal found that the denial of cenvat credit was unfounded, as the appellants had not utilized the notification and hence were eligible for the credit. Consequently, the Tribunal set aside the denial of cenvat credit.

In conclusion, the Tribunal ruled in favor of the appellant on both issues, setting aside the demand for service tax and the denial of cenvat credit. The decision was based on the appellant's compliance with relevant rules and previous orders, supported by legal provisions and case law.

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