CENVAT credit on common input services did not defeat hotel abatement, and laundry demand failed without proof of taxable service.

Abatement under Notification No. 1/2006-ST remained available for hotel accommodation services even though CENVAT credit had been availed on common input services used for both taxable and exempt activities, because the restriction applies only where credit is taken on input services used for the specified service itself. The demand relating to laundry services also failed because the revenue did not prove that the activity was actually dry cleaning or any other taxable service. On both issues, the assessee succeeded and the impugned order was set aside.

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Issues: (i) Whether availing CENVAT credit on common input services used for taxable as well as exempt services disentitled the assessee from abatement under Notification No. 1/2006-ST for hotel accommodation services; (ii) Whether the demand on "laundry services" was sustainable.

Issue (i): Whether availing CENVAT credit on common input services used for taxable as well as exempt services disentitled the assessee from abatement under Notification No. 1/2006-ST for hotel accommodation services.

Analysis: The condition in the notification is that credit should not be availed on input services used for providing the specified taxable service. Credit taken on common input services, not specifically relatable to the accommodation service, does not by itself defeat the abatement. Following the earlier view accepted in similar hotel-service disputes, the composite value charged for accommodation remained eligible for the abatement.

Conclusion: The assessee was entitled to abatement under Notification No. 1/2006-ST despite availing credit on common input services.

Issue (ii): Whether the demand on "laundry services" was sustainable.

Analysis: The notice referred only to laundry services, and the revenue did not establish that the activity was actually dry cleaning or any other taxable service. In the absence of proof by the revenue that a taxable service was rendered, the demand could not be sustained.

Conclusion: The demand on laundry services was not sustainable.

Final Conclusion: The appeal succeeded in full and the impugned order was set aside.

Ratio Decidendi: Abatement under Notification No. 1/2006-ST is not denied merely because common input service credit was availed, unless the credit is on input services used for the specified service itself, and a tax demand must be supported by proof that the alleged taxable service was actually rendered.

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