Reversal of excess cenvat credit

[Shyambihari Sharma]

Dear Sirs, We are a service receiver of GTA and paid service tax (Goods Transport by Road) from January'2005 onwards and taken CENVAT credit against our service tax payment fully. We have not availed the abatement of 75% as per Govt. Notification no. 13/2008 (service tax) adted 01.03.2008 and paid service tax on 100% of the Inward freight and taken the CENVAT credit against our service tax payment fully. The auditors of Central Excise and Service Tax has objected for the availment of excess service tax credit. We have not availed the abatement of 75% and paid fully and taken the CENVAT credit accoring to our payment. They are asking us to reverse the excess CENVAT credit and pay the difference Duty from PLA . They are treating our payment of service tax (75%) as excess payment and disallowing the CENVAT credit against this excess payment. The period of excess payment is from March'2008 to February'2009). We need your help and advise in this respect. Thanking you, Yours faithfully, for Ashirwad Steels & Ind. Ltd. S B Sharma

[Rama Krishana]

The stand of auditors of central excise and service tax is not acceptable. You have paid the service tax without availing the benefit of exemption and taken the same as cenvat credit. They should not put you in trouble. But, if a show cause notice is issued in this regard, I beleive that you would get the relief at appropriate level since you have paid the service tax first.

AI Summary

CENVAT credit validity upheld where service tax was paid despite available abatement; reversal not warranted absent challenge. The taxpayer paid full service tax on transport services instead of claiming the abatement and took CENVAT credit; auditors allege excess credit and seek reversal and recovery. The advisory view is that CENVAT credit is properly available where tax was actually paid without claiming the abatement, and the auditors' demand is not sustainable; any show cause notice should be contestable on that basis.