TaxTMI 
TaxTMI 
2015 (6) TMI 626
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....5) of Section 65 of the Finance Act that the benefit of the Notification No.1/2006-ST will not apply to the cases where the assessee has availed Cenvat credit of duty on inputs or capital goods or the Cenvat credit of service tax on input services used for providing such taxable service. The appellant was availing Cenvat credit during the period April, 2006 to March, 2007 and also claiming the benefit of Notification No.1/2006-ST. On realisation that the appellant is not entitled to avail the benefit of the Notification as they are availing Cenvat credit, the appellant immediately deposited the amount of Cenvat credit availed during the period April, 2006 to March, 2007 along with interest on 03.10.2007 and intimated to the Department on 04.10.2007. On doing this, the Revenue issued two Show Cause Notices to the appellant on 15.02.2007 and 25.02.2008 respectively to deny the benefit of Notification No.1/2006-ST and consequently demanded the service tax along with interest and equivalent amount of penalty was imposed. In the Show Cause Notices it was also alleged that as the appellant has not paid service tax on due dates, therefore, appellant is required to pay interest for the int....
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....the credit has been reversed before the point of taxation then the same shall amount non-availment of the benefit of Cenvat credit. But in this case, the appellant is regular provider of output services and the said credits have been utilised by the appellant for the payment of service tax. Therefore, they are not entitled to avail the benefit of Notification No.1/2006-ST ibid. He further submits that the demand of interest has rightly been confirmed against the appellant. 5. Heard the parties and considered the submissions. 6. In this case, the following issues have emerged for consideration of the basis of arguments advanced by both the parties:- (a) Whether the appellant is entitled for the benefit of Notification No.1/200-ST ibid on reversal of Cenvat credit on realisation that they are not entitled to avail the Cenvat credit if claiming the benefit of Notification No.1/2006-ST or not. (b) Whether the appellant is liable to pay interest for delayed payment of service tax as per Rule 6(2A) of Service Tax Rules, 1994 or not. 7. To decide the issue of availment of benefit of Notification No.1/2006-ST ibid, we find that in this case, the appellant has reversed the inadmissible....
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....nputs which were utilised in the manufacture of duty free goods, the manufacturer could avail of the Modvat credit as well as full duty exemption under applicable small scale exemption notification with regard to some specified goods. Reference is answered accordingly. 7. As a result the impugned order-in-appeal dated 28-1-1999 passed by the Central Excise is set aside and the appeal of Franco Italian Company (supra) is allowed subject to the conditions that Modvat credit taken of the duty paid on the inputs which were utilised in the manufacture of duty free goods, is reversed." 18. In view of the above decision we are of the opinion that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence the benefit has to be given of the notification granting exemption/rate of duty on the final product since the reversal of the credit on the input was done at the Tribunal s stage. 19. The Tribunal while passing the impugned order dated 1-10-2003 [2004 (163) E.L.T. 55 (Tri. - Del.)] has not referred to the larger Bench decision of the Tribunal and other binding decisions. In Chandrapur Magnet Wire Limited v. Collector Central Excise, 1996 (81) E.L.T. 3 the Supreme C....
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.... the High Court that if the exemption is subject to non-availment of modvat credit on inputs, the subsequent reversal of modvat credit amounts to non-taking of credit on inputs and the benefit of exemption notification number 15/94-C.E., is to be granted, even when reversal of credit on inputs was done at Tribunal stage. 8.1 The above judgment of the High Court is based on five member bench decision of the Tribunal in the case of Franco Italian Company Private Limited v. C.C.E., 2000 (120) E.L.T. 792. This judgment in turn based on the Supreme Court judgment in the case of Chandrapur Magnet Wire Private Limited v. C.C.E., Nagpur, 1996 (81) E.L.T. 3. 8.2 I have gone through the Hon ble Supreme Court of India s judgment in the above mentioned case, and I find that it has been laid down/held that debit entry in modvat credit account indicates as if no credit was taken on such inputs. This judgment has been followed in a number of Tribunal judgments. The latest has been a case of the Commissionerate of Service Tax itself in the case of CST, Ahmedabad v. M/s. Amola Holdings Private Limited. This judgment was given in order No. A/1148/WZB/AHD/09 dated 1-6-2009. This judgment also stand....