TaxTMI 
TaxTMI 
2023 (3) TMI 131
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....s taxable services to their clients situated at Jammu & Kashmir and services provided to the units of situated in Special Economic Zones. In view of the Section 64 of Finance Act 1994, Service tax was not leviable on services provided in the State of Jammu & Kashmir. The Service provided in the SEZ units were exempted vide Notification No. 4/2004-ST dated 31.03.2004. Thus as per the definition of 'exempted service' given in Rule 2 (e) of Cenvat Credit Rules 2004 these both the services are exempted services. It was found that Appellant had not maintained separate account in respect of receipt, consumption and inventory of input services meant for use in providing output services which were chargeable to tax as well as exempted service, as provided under Rule 6(2) of Cenvat Credit Rules, 2004, but they had availed Cenvat Credit on the entire input services received by them. Thus as per condition of clause (c) of Rule 6(3) of Cenvat Credit Rules 2004 w.e.f. 10.09.2004 appellant were required to utilize credit only to the extent of an amount not exceeding 20% of the amount of Service tax payable on taxable output services. Prior to this date, the service provider were entitled to the ....
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....ts of this case, supply of service to unit in SEZ were 'exports' and therefore all benefits of 'exports' would be available to the Appellant. Accordingly, in terms of Rule 6(6A) of Cenvat Credit Rules, 2004, there was no requirement to reverse any amount of Cenvat Credit in terms of Rule 6(3) of the Cenvat Credit Rules, 2004, when 'taxable services' are provided, without payment of service tax, to a unit in a Special Economic Zone with due procedure. He placed reliance on the following decisions: • HEWLETT PACKARD INDIA SALES PVT. LTD. VS. CCE -2014(35)STR 410 (TRI. BANG.) • CCE VS. ELINS SWITCH BOARDS PVT. LTD. -2017(49)STR 398(KAR.) • CCE VS. FOSROC CHEMICALS (INDIA) PVT. LTD. -2015(318)ELT 240 (KAR.) • CCE VS. DEE DEVELOPMENT ENGINEERS PVT. LTD. -2016(339)ELT 560 (P&H) • UOI VS. STEEL AUTHORITY OF INDIA LTD. -2017(297)ELT 166 (CHHATTISGARH) • COMMISSIONER VS. INDIA CEMENT LTD. -2020(34)G.S.T.L. 425(TELANGANA) • SUJANA METAL PRODUCTS LTD. VS. CCE - 2011(273)ELT 112(TRI. BANG.) • RELIANCE PORTS AND TERMINALS LTD. VS. CCE -2015(40)STR 200(TRI. AHMD.) 3.2 Further he submits tha....
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.... • NARMADA CHEMATUR PHARMACEUTICALS LTD. - 2005(179)ELT 276(SC) • CCE, PUNE VS. COCA -COLA INDIA PVT. LTD. - 2007(213)ELT 490(SC) • JAY YUHSHIN LTD. VS. CCE- 2000(119)ELT 718 (TRIBUNAL -LB) • CCE VS. INDEOS ABS LTD - 2010(254)ELT 628 (GUJ.) • KANSAI NEROLAC PAINTS LTD. VS. CCE-I - 2016(339)ELT 467 (TRI. AHMD.) • CCE VS. GUJARAT GLASS PVT. LTD. - 2013 (290) ELT 538. • PRECOT MILLS LTD. VS. CCE - 2014(313) ELT 789 (TRI. BANG.) • ALEMBIC LTD. VS. CCE, VADODARA-I- 2014 (308) ELT 535(TRI. AHMD) • CCE VS. SPECIAL STEEL LTD.- 2015(329)ELT 449 (TRI. MUMBAI) • MAHINDRA & MAHINDRA LTD. VS. CCE - 2016(333)ELT 124(TRI.-MUMBAI) 3.4 He argued that it is a settled legal position that in cases where an assessee had not maintained separate accounts for cenvat credit attributable to taxable services and exempted services and cenvat credit for all inputs services was taken, then on paying back amount of cenvat credit attributable to the exempted services, the situation was as if no cenvat credit was taken by the assessee of exempted services. Therefore, the demand that reven....
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....ndering both taxable and exempted output service, then there would be a restriction of 20% for availment of credit for payment of tax on output service. As per revenue,appellant has utilized 100% of credit taken instead only 20% as was prevalent during the relevant period in terms of Rule6(3)(c) of CCR, 2004. It is true that during the relevant period only 20% of credit could be utilized but we find force in the argument of the appellant that they were not barred from taking credit but were only barred from utilizing it. They were free to utilize remaining 80% in the immediate next financial year. 5.1 Further we also find that the prevailing provisions of Rule 6(3)(c) of the Cenvat Credit Rules,2004 provides as under : "6(3)(C) the provider of output service shall utilized credit only to extent of an amount not exceeding twenty percent. of the amount of service tax payable on taxable output service' The excess utilized credit cannot be demanded, as Rule6(3)(c) is silent with regard to the period during which the 20% credit shall be utilized and in this regard Tribunal in case of Vijayanand Roadlines Ltd. v. CCE, Belgaum reported in 2007 (7) S.T.R. 219 (Tri.-Bang.), w....
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....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 the services rendered in Jammu & Kashmir to be exempted service. As per the definition given in Rule 2(e) of CENVAT Credit Rules 'Exempted services' means taxable services which are exempt from the whole of the service tax leviable thereon and includes services on which no service tax is leviable under Section 66 of the Finance Act. Since the service provided to the state of J&K are not liable to service tax, as Section 64 of Chapter V of Finance Act, 1994 excludes the applicability of service tax to the state of Jammu and Kashmir, these services are neither taxable nor exempted. The services provided to non-taxable territory cannot be considered as exempted service. Hence in our view provisions of Rule 6 of Cenvat Credit Rules is not applicable and no service tax demand is sustainable in this matter. We also find the support in this conte....
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.... becomes an exempted service when by notification or law, the service tax payable on such service is exempted. Rule 6(2) does not apply to a situation where the service provider renders both taxable services and services which are not subject to service tax. The law is silent in this regard. The Department cannot construe the services provided to Jammu & Kashmir as exempted services and press into application, in such situations, Rule 6 of Cenvat Credit Rules, 2004. As the services provided to Jammu & Kashmir are not subject to levy of service tax, whether such services would fall into the definition of 'output service' during the relevant period is itself doubtful. As per the definition of input 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. 5.4 Another dispute in the present matter is related to the services provide by the Appellant to the SEZ units. As per the revenue since the services provided toSEZ are exempted, the appellants are not eligible for the Cenvat credit and accordingly are liable to pay ....
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....(E), dated 1-3-2011 [3/2011-Central Excise (N.T.), dated 1-3-2011] In the Cenvat Credit Rules, 2004, in Rule6, after sub-rule (6), the following sub-rule shall be inserted with effect from the 10th day of February, 2006, namely :- "(6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of Service Tax, to a Unit in a SpecialEconomicZone or to a Developer of a SpecialEconomicZone for their authorized operations." From 10th February, 2006 to 28th February, 2011. 5.5 On perusal of the above reproduced retrospective amendment, we find that vide Section 144 of the Finance Act, 2012, the amendment was given retrospective effect from 10-2-2006 to 20-2-2011. In other words, during the impugned period, there was no need for the assessee to reverse any credit taken on the inputs/input services in respect of which credit was availed for rendering of output services to SEZ units/SEZ developer.Therefore, we hold that the demand of service tax confirmed by the impugned order is not sustainable in law. 5.6 Further, we also find that the Hon'ble High Court of Bombay, in the case of Repro India Ltd., re....