2026-VIL-448-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Utilization of CENVAT Credit exceeding 20% limit - The appellant utilized CENVAT Credit in excess of the 20% restriction prescribed under Rule 6(3)(c) of the CENVAT Credit Rules for certain months, but the total credit utilized was within the 20% limit for the entire financial year - Demand alleging excess utilisation of CENVAT Credit in excess of the restriction of 20% of the Service Tax payable on the taxable output services as prescribed under Rule 6(3)(c) of the CCR, 2004 – HELD - The demand on this count is not sustainable as there is no requirement under the Rules to calculate the 20% limit on a monthly basis. As the appellant has utilized the credit within the permissible limit for the Financial Years 2004-05 and 2005-06, the appellant has complied with the provisions of Rule 6(3)(c) of the CENVAT Credit Rules - The appellant has complied with the 20% limit for the financial year, hence the demand on this ground is set aside - The matter regarding quantification of proportionate CENVAT credit reversal under Rule 6(3A)(ii) is remanded to the adjudicating authority. The penalty imposed is also set aside – The appeal is partly allowed - Non-registration under "Input Service Distributor" category - The appellant's Head Office had obtained registration as Input Service Distributor in 2004 itself, not in 2008 as alleged by the department – HELD - The demand on this ground is not sustainable as the Head Office was validly registered as an Input Service Distributor, hence this demand is set aside - Demand for 8% of value of exempt services - The appellant had wrongly opted for the 8% payment option under Rule 6(3A)(i), whereas their intention was to avail the option under Rule 6(3A)(ii) i.e., reversal of proportionate CENVAT credit attributable to exempt services. HELD - There is no need to opt separately for making payment of 8% of the value of exempted services. A clerical error on their part would not automatically mean that they are required to avail option (i) alone and not option (ii). Accordingly, agree with the submission of the appellant that their intention was to avail the option of proportionate reversion of CENVAT Credit attributable to exempted services only. Accordingly, demand for payment of 8% of the value of exempted services confirmed in the impugned order for the Financial Year 2008-09 is legally not sustainable - The appellant is liable to reverse only the proportionate CENVAT credit attributable to exempt services as per Rule 6(3A)(ii), which is to be quantified by the adjudicating authority.
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