2016 (6) TMI 1071

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....Service Tax Department. It is the case of the department that appellant availed irregular credit on two grounds. Firstly that appellant availed CENVAT credit of service tax paid on input services for providing output services to State of Jammu & Kashmir and to other parts of India. Section 64 of Chapter V of the Finance Act, 1994 excludes the applicability of service tax to the State of Jammu & Kashmir. Therefore the audit team observed that appellant is bound to reverse the CENVAT credit availed on common input services as provided under Rule 6(3)(ii) read with Rule 6(3A)(b)(iii) of CENVAT Credit Rules which is applicable to a provider of both taxable and exempted services. The department is of the view that when the Finance Act, 1994 itse....

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....ervice. The appellant had replied stating that the notice does not clarify what exactly is meant by the words non-taxable services . The learned counsel pointed out that Rule 6(2) of CENVAT Credit Rules comes into application when the manufacturer / service provider avails credit on inputs / input services used for manufacture of final products or providing output service which are chargeable to duty / tax as well as exempted goods / exempted services. That the services rendered by appellant to Jammu & Kashmir are not exempted services and therefore the provision does not apply. The appellant is not liable to reverse the credit as the credit was rightly availed on common input services for services rendered in Jammu & Kashmir and DTA. The l....

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....for providing services in State of Jummu & Kashmir and other parts of India. The proviso to sub-clause (2) of Rule 1 of CENVAT Credit Rules states that nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the State of Jammu and Kashmir . Again, as per Section 64 of the Finance Act, 1994, the Act extends to the whole of India except the State of Jammu & Kashmir.  Thus there is no levy of service tax on the services provided in Jammu & Kashmir. The department has construed or rather confused the services rendered in Jammu & Kashmir to be exempted services. The observation made by Commissioner(Appeals) in this regard is reproduced as under:- 6.1. As per the definition give....

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..../2008 to 9/2010. During the relevant period the definition of output service under Rule 2(p) of CENVAT Credit Rules, 2014 is any taxable service, excluding the taxable service referred to in sub-clause (zzp) of Clause (105) of Section 65 of Finance Act, provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person as the case may be, and the expression provider and provider shall be construed accordingly. The definition of output service includes only the taxable services provided by a person. The definition of input service is given in Rule 2(l). Input service means any service used by a provider of taxable service for providing an output service. Undeniably, the services provided in the ....

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....ut service, only if the service provider uses for providing output service will the service be qualified as input service. In any case, the services rendered to Jammu & Kashmir do not fall in the category of exempted services. 7. The learned AR relied on the judgment laid in M/s. Vodafone Essar ltd. (supra) and contended that the said case squarely covers the issue. The Tribunal in the said case was considering the eligibility of credit availed on capital goods / assets installed in branch office in Jammu & Kashmir. The facts and issue being different, the said case, in my opinion, is not applicable to the case in hand. 8. In ECIL Rapiscan Ltd. case (supra) and ECIL Rapiscan Ltd. [2010(17) STR 433 (Tri. Bang.)] Stay Order dt. 13/05/20....