AI Drafter 
TaxTMI 
TaxTMI 
2017 (7) TMI 293
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.... and the CENVAT credit accrued thereby are used for discharge of tax on output service. In computation of tax liability arising on the consideration for the two services supra, assessee avails the benefit of notification no.1/2006-ST dated 1^st March 2006 which permits abatement of 67% of the gross value of consideration for these two services subject to the condition that CENVAT credit of duty/tax paid on inputs/input services/capital goods have not been availed. 3. The benefit of the abatement was sought to be denied in the two notices issued to the assessee. The first, for the period from April 2006 to March 2008, demanding service tax of Rs. 12,72,73,571 on availed abatement of Rs. 98,99,76,457 was dropped by Commissioner of Service Tax, Mumbai-II vide order-in-original no.01/ST-II/WLH/2012 dated 22^nd December 2011 as the assessee had reversed the CENVAT credit of Rs. 30,21,703 which, the adjudicating authority, relying upon the decision of the Hon'ble Supreme Court in Chandrapur Magnet Wires (P) Ltd v. Commissioner of Central Excise [1996 (81) ELT 3 (SC)] that was reiterated in Commissioner of Central Excise v. Bombay Dyeing & Mfg Co Ltd [2007 (215) ELT 3 (SC)], felt was s....
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....ted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply stri....
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....r grievance that the adjudicating authority had failed to take note of the reversal of CENVAT credit. According to Learned Counsel, the decision of the Hon'ble High Court of Allahabad in M/s Hello Minerals Water Private Ltd v. Union of India [2004 (174) ELT 422 (Allahabad)] permitting subsequent reversal of credit should have guided the adjudicating authority. Learned Counsel also cited a number of decisions in support of his submissions. 9. It is common ground that the appellant had availed CENVAT credit which was reversed subsequently so that the eligibility for abatement of 67% is not denied. There can be no two opinions that an exemption notification, being a deviation, albeit authorised, from the legislative mandate to levy tax, must be subject to strict interpretation. In the light of the rival contentions, we take note that the issue can be resolved by ascertainment of conformity with the test enunciated in re M/s Hari Chand Shri Gopal. 10. Such an exercise will benefit from a recapitulation of the scheme of CENVAT Credit Rules, 2004 and the provision of abatement so that the perspective is not lost sight of. We, therefore, do so. 11. Prevention of cascading effects....
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....ces that have been rendered. In the early years of this levy, only services simpliciter were included in section 65(105) of Finance Act, 1994. Widening of the tax net encompassed services that, inevitably, could not be rendered without concurrent transfer of tangible materials. Such composite transactions are a reality in commercial contracting. Disaggregation is unavoidable owing to the constitutional scheme of separation of central and state jurisdictions in tax matters. Abatement, thus, resolved the potentially vexatious issue isolating of the service component in such composite transactions. 14. Regrettably, the statute had not envisaged such an eventuality and did not provide for it in section 67 of Finance Act, 1994. The frailties of expression may have also been a stumbling block in venturing to do so. The Central Government, perforce, resorted to the exemption powers under section 93 of Finance Act, 1994 to enable abatement. Thus, the resolution of a valuation conundrum by tweaking an exemption mechanism lies at the root of this dispute. Abatement should not, considering the scheme of CENVAT credit, have been denied in the absence of any allegation of insufficient credit....
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.... 18. The decisions in re M/s Hari Chand Shri Gopal and re Meridien Industries Ltd were rendered in the context of taxability of products and application of rate of tax. The condition of exemption/ concession was specific, the objective of the notification was unambiguously clear and could be met only by strict compliance. The decision of the Hon'ble High Court of Bombay in re Dilip Chhabria Designs Pvt Ltd does not further the cause espoused by Revenue as the finding therein that '15. To our mind, this was a clear distinguishing feature from the cases and decisions relied upon by the Tribunal. The Order-in-Original concluded and to our mind rightly that this was an admitted position of a clandestine removal. There was no payment of Excise duty by the manufacturer on excisable goods. The payment was not made by claiming exemption and entitlement under Notification No.3/2001-C.E. which is a conditional exemption. This is a case of admitted Modvat credit taken on glasses used in the manufacture of buses and tempo travelers. The assessee did not reverse the Modvat credit at the time of removal of goods or after removal. No efforts were made by the assessee to reverse the same. In....