Tribunal rules demand for 8%/6%/5% of value of exempted services not applicable under Rule 6(3)

The Tribunal upheld the impugned order and dismissed the Revenue's appeal, ruling that the demand for 8%/6%/5% of the value of exempted services was not applicable as the respondent had already repaid the Cenvat credit with interest attributed to exempted service. The Tribunal found that once the credit for common inputs used for exempted service is reversed with interest, the demand under Rule 6(3) is not sustainable, citing previous judgments in favor of the respondent.

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Issues involved:
The issue in this case is whether the respondent is liable to pay 8%/6%/5% of the value of exempted service for not maintaining separate accounts, despite having paid back the full amount attributed to exempted service along with interest.

Summary:

The appeal was filed by the Revenue against the adjudication order passed by the Commissioner, Central Excise Rajkot. The Revenue argued that the respondent should pay 8%/6%/5% of the value of exempted services as they did not maintain separate accounts for input services used for exempted goods, as per Rule 6(3) of Cenvat Credit Rules, 2004. The Revenue relied on a Bombay High Court judgment to support their position.

Upon hearing the arguments, the Tribunal noted that the respondent had already paid back the entire Cenvat credit availed along with interest, which was partly attributed to exempted service. The Tribunal referenced previous judgments where it was held that once the Cenvat credit of common inputs used for exempted service is reversed along with interest, the demand for 8%/6%/5% under Rule 6(3) is not sustainable. The Tribunal also cited various cases where similar issues were decided in favor of the respondent.

The Tribunal distinguished the judgments relied upon by the Revenue and concluded that the demand for 8%/6%/5% was not applicable in this case. Therefore, the impugned order was upheld, and the Revenue's appeal was dismissed.

In the open court on 19.06.2023, the Tribunal pronounced the decision in favor of the respondent, stating that the demand for 8%/6%/5% was not sustainable given the circumstances where the respondent had already paid back the entire Cenvat credit along with interest attributed to exempted service.

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