2025-VIL-1880-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Reversal of proportionate CENVAT credit - The appellant was providing both taxable and exempted services and availed common CENVAT credit. The appellant contended that it had reversed the proportionate CENVAT credit attributable to the exempted services, which tantamount to not taking the credit - Whether the demand of 6%/5% of the value of the exempted services under Rule 6(3) of the CENVAT Credit Rules, 2004 was legally sustainable - HELD - Rule 6 (3A) provides the facility for the appellant to proportionately reverse the cenvat credit if the same has been taken for taxable and exempted services. As a matter of fact Rule 6 (3AA) to facilitate such reversal, even if the option to reverse the proportionate cenvat credit is not exercised earlier. This amendment goes on to show that liberal approach is required to be adopted in respect of reversal being sought for the common credits - Various High Courts and Tribunals have consistently held that reversal of CENVAT credit would amount to non-availment of the same. The demand of 6% to 8% of the value of the exempted services is legally not sustainable. Further, the extended period demand is also not sustainable as the non-payment/short-payment, if any, was due to interpretational difficulties and the appellant had shown bona fides by making the payment of Service Tax along with interest – The demand confirmed as well as the extended period demand is set aside, except for the demand in respect of foreign remittance RCM, which was not contested by the appellant - The appeal stands allowed
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