Appellants entitled to re-credit service tax amount, High Court supports, demand set aside

The Tribunal held that the appellants were entitled to re-credit the service tax amount of Rs. 20,83,773/- as it was a correction of excess reversal, not subject to the time-limit for adjustment under Rule 6(3A). The High Court precedent supported their right to take such credit, dismissing the department's argument that it contravened Cenvat credit rules. The impugned order confirming the demand was set aside, and the appeal was allowed, granting consequential reliefs if applicable.

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Issues:
1. Re-credit of service tax amounting to Rs. 20,83,774/- taken in March 2014.

Analysis:
1. The appellants provided storage and warehousing services for rice, considering it as an exempted service even after the negative list introduction. However, a subsequent amendment clarified that these services were taxable until March 2014. The appellants paid arrears and interest for this period. They then took suo motu re-credit of Rs. 20,83,773/-, the excess credit reversed earlier. The department disputed this re-credit, arguing it was not eligible and should have been adjusted before June 2013. A show-cause notice was issued, leading to the original authority confirming the demand with interest and penalty.

2. The appellants contended that the re-credit was valid as they intimated the department promptly and relied on a High Court decision supporting their right to take such credit. They argued that the re-credit was not an adjustment under Rule 6(3A) and thus not subject to the time-limit for reversal/adjustment of credit. The department, however, maintained that the re-credit contravened Cenvat credit rules by not being adjusted within the prescribed period.

3. The Tribunal examined the re-credit issue and found it to be a correction of excess reversal, not requiring adjustment under Rule 6(3A). The High Court precedent cited by the appellants supported their eligibility to take suo motu credit. The Tribunal concluded that the appellants were entitled to the re-credit of Rs. 20,83,773/- as it was not a reversal of proportionate credit but a correction of unnecessary reversal. The allegation that the re-credit should have been taken before June 2013 was dismissed, as it was not a reversal but a re-credit of unrequired credit.

4. Consequently, the Tribunal held that the impugned order was unsustainable and set it aside. The appeal was allowed, providing consequential reliefs if applicable.

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