CENVAT credit on common input services upheld where abatement claim did not bar credit under the notification.

CENVAT credit on common input services was held available even while claiming abatement under Notification No. 1/2006-ST, because the notification bars exemption only where credit is taken on inputs, capital goods, or input services used for providing the very taxable service. Rule 6(5) of the Cenvat Credit Rules, 2004 protected credit on specified input services unless used exclusively for exempted services, and the notice did not show such exclusive use. Reading the notification and rules harmoniously, the demand for wrongful credit and denial of abatement was unsustainable, and the order was set aside in favour of the assessee.

---

---

Issues: Whether CENVAT credit on common input services could be availed while claiming abatement under Notification No. 1/2006-ST for the taxable services in question.

Analysis: Notification No. 1/2006-ST denies the exemption only where the CENVAT credit of inputs, capital goods, or input services used for providing the very taxable service has been taken. Rule 6(5) of the Cenvat Credit Rules, 2004, which contained a non obstante clause, permitted credit of specified input services unless they were used exclusively for exempted services. The disputed credit related to common input services used for taxable output services as well, and the notice did not establish exclusive use for exempted services or any legal bar to such credit. The notification and the rules had to be read harmoniously, and the assessee remained entitled to credit on the specified common services.

Conclusion: The demand on the alleged wrongful availment of credit and denial of abatement could not be sustained, and the impugned order was liable to be set aside in favour of the assessee.

---