2022-VIL-873-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Rendering of output services in State of Jammu and Kashmir - Respondent-assessee provided “Erection, Commissioning and Installation Services” to M/s National Hydroelectric Power Corporation Ltd., Jammu and Kashmir (M/s NHPC) without payment of any service tax – Dept objection that services to M/s NHPC were provided by the respondent by using Cenvated input-services that were also not covered under Rule 6(5) of Cenvat Credit Rules, 2004 - whether appellants are liable to reverse the credit availed on common input services used for rendering services in Jammu & Kashmir – HELD – Department has construed or rather confused the services rendered in Jammu & Kashmir to be exempted services - as per the definition of input service given in Rule 2(l) of CCR, 2004, input service means any service used by a provider of taxable service for providing an output service. Undisputedly, the services provided in the State of Jammu & Kashmir are not taxable services - The services rendered in Jammu & Kashmir are not chargeable to service tax and therefore, are not taxable services, this does not make them exempted services also - A service becomes an exempted service when by notification or law, the service tax payable on such service is exempted - 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 J&K 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 - in the present matter, appellant already reversed the proportionate Cenvat Credit attributable to the said disputed service. Therefore, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand @ 5% / 6%/ 7% cannot be demanded – further, there is no provisions in Rule 6 of CCR, 2004 that if the assessee does not opt any of the option at a particular time, then option of payment of 5%/ 6% will automatically be applied - the Ld. Commissioner had rightly dropped the demand and granted the relief to the respondent - the impugned order is upheld and the Revenue appeal is dismissed
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