Strict compliance for service tax abatement denied where Cenvat credit on input services broke notification conditions.

Abatement under Notification No. 01/2006-ST, as amended, was unavailable where the assessee had availed Cenvat credit on input services used for restaurant and accommodation services. The notification conditions required non-availment of credit on inputs, capital goods and input services relating to the taxable services, and exemption provisions were to be strictly construed. Because credit had been taken on services such as maintenance, internet and courier, and no convincing material showed absence of nexus with the hotel services, the assessee failed to prove full compliance. The abatement claim was therefore rejected and the demand sustained.

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Issues: Whether the appellant was eligible for abatement under Notification No. 01/2006-ST, as amended, despite availing Cenvat credit on input services used for restaurant and accommodation services.

Analysis: The abatement notifications were conditional and required non-availment of Cenvat credit on inputs, capital goods, or input services used for the taxable services. The record showed that, for the relevant period, credit had been taken in respect of input services such as maintenance, internet, and courier services. The explanation that these services were not exclusively used for the taxable services was not accepted, as no cogent material showed that they had no nexus with the hotel services provided. Since exemption notifications are to be construed strictly, the assessee had to establish full compliance with the conditions, which it failed to do.

Conclusion: The appellant was not entitled to the abatement benefit, and the demand confirmed in the impugned order was upheld.

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