Contract-wise service tax abatement under Notification No. 1/2006 required fresh factual verification of CENVAT credit use.

Notification No. 1/2006-Service Tax was treated as operating contract-wise for commercial or industrial construction service, with abatement unavailable only where CENVAT credit is taken for the same service for which exemption is claimed. The Tribunal noted earlier connected decisions taking that view, but held that the factual position needed fresh verification because the appellant contended that credit had been availed only for other projects. The impugned order was set aside and the matter was remanded for reconsideration without any finding on the merits of the tax demand.

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Issues: Whether the appeal deserved to be allowed by way of remand for reconsideration of the applicability of Notification No. 1/2006-Service Tax in light of the condition relating to non-availment of CENVAT credit on inputs, capital goods, or input services.

Analysis: The matter concerned the scope of the abatement under the service tax exemption notification for commercial or industrial construction service and the effect of CENVAT credit availed in some contracts. The Tribunal noted that the issue had been addressed earlier in the appellant's own case and in connected decisions, where it was held that the notification operates contract-wise and that abatement is unavailable only where credit is taken in respect of the relevant service for which exemption is claimed. The Tribunal, however, found it appropriate to send the matter back so that the adjudicating authority could examine the factual matrix afresh and verify the appellant's contention regarding credit availed only in respect of other projects.

Conclusion: The impugned order was set aside and the matter was remanded for fresh consideration without any finding on the merits of the tax demand.

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