Abatement benefit survives reversal of inadmissible Cenvat credit with interest when the breach is cured and no prejudice remains.

Abatement under Notification No. 1/06-S.T. could not be denied merely because Cenvat credit on input services was temporarily availed for the relevant month and later reversed with interest. The condition for the benefit was non-availment of such credit, but the breach was treated as cured once the full credit was reversed and no dispute remained on the reversal or its quantum. On that basis, the demand for differential service tax was held unsustainable, and the assessee remained entitled to the abatement benefit.

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Issues: Whether the respondent was denied abatement under Notification No. 1/06-S.T. and made liable for differential service tax merely because Cenvat credit of service tax paid on input services was availed for the relevant month and later reversed with interest.

Analysis: The condition attached to the abatement benefit was the non-availment of Cenvat credit on input services. The respondent had admittedly reversed the entire offending credit of Rs. 1,198/- along with interest, and there was no dispute regarding the quantum or the fact of reversal. In these circumstances, the breach stood cured and the benefit could not be denied on a purely technical footing.

Conclusion: The respondent remained entitled to the abatement benefit, and the demand for differential service tax was not sustainable.

Ratio Decidendi: Where the recipient of an exemption or abatement reverses the inadmissible Cenvat credit with interest and no substantive prejudice remains, the benefit cannot be denied merely on account of a temporary or technical availment of credit.

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