Tribunal Upholds Decision: No Liability for Respondent After Proportionate Credit Reversal on Exempted Services.

The Tribunal dismissed the Revenue's appeal and upheld the decision of the Adjudicating Authority, which had dropped the show cause notice against the respondent. The Tribunal concluded that the respondent was not liable to pay 5%/6% of the value of the exempted service, as they had reversed the proportionate credit attributed to the exempted service, including interest. The Tribunal relied on precedents such as CCE vs. Himmat Glazed Tiles, determining that the demand for payment would not sustain when credit is appropriately reversed.

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Issues involved:
The issue involved is whether the respondent is liable to pay 5%/6% of the value of exempted service i.e. Trading Activity despite having reversed the proportionate credit attributed to such exempted service along with interest. The Revenue filed an appeal challenging the dropping of the show cause notice by the Adjudicating Authority based on the respondent's reversal of credit.

Issue 1: Liability to pay 5%/6% of the value of exempted service
The Adjudicating Authority dropped the show cause notice after the respondent reversed the proportionate credit attributed to exempted service i.e. Trading Activity along with interest, citing the judgment in the case of M/s. Foods, Fats & Fertilizers Ltd Vs. CCE, Guntur. The Revenue contended that since the respondent did not opt for the option of proportionate reversal of credit, they should pay 5%/6% of the value of exempted service.

Issue 2: Revenue's appeal
The Revenue argued that the respondent, by not opting for the option of proportionate reversal of credit in writing to the department, is not entitled to avoid paying 5%/6% of the value of exempted service. The Revenue sought to sustain the demand based on this ground.

Decision:
After considering the arguments, the Tribunal found no dispute regarding the proportionate reversal of cenvat credit attributed to the value of exempted service i.e. Trading Activity. Citing various judgments, including CCE vs. Himmat Glazed Tiles and others, the Tribunal held that the demand of 5%/6% of the value of exempted service will not sustain when the credit is reversed. The Tribunal upheld the impugned order, dismissing the Revenue's appeal.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

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