2026-VIL-1116-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Demand under Rule 6(3) of CENVAT Credit Rules, 2004 - CENVAT credit on common input services used for both taxable and exempted services – Non-maintenance of separate account of CENVAT credit taken for taxable and exempted services – Demand for reversal of credit under Rule 6(3) of CCR – Appellant contention is demand under Rule 6(3) of CCR does not arise because it had only availed proportionate amount of CENVAT credit on common input services – HELD - The Rule 6 of the CENVAT Credit Rules provides three options to an assessee for managing CENVAT credit on common input services: not availing credit on inputs exclusively used for exempted services, maintaining separate accounts, or paying a prescribed percentage of exempted services value. The assessee is free to choose any option. Nothing in the CCR permits officers to make a choice and require the assessee to fulfil obligation as per the officers’ choice. An amount under rule 6(3) of CCR cannot be demanded from the assessee under Rule 14 of CCR by making a choice for the assessee - Additionally, if the assessee has already taken only proportionate CENVAT credit on common input services and has not availed complete credit attributable to exempted services, the question of reversing any portion under Rule 6(3) does not arise - The demand of amount under Rule 6(3) of CENVAT Credit Rules is set aside and the appeal is allowed - Appropriation of tax on the same services but under different service heads - Short payment of service tax on erection, commissioning and installation services – Demand of additional service tax alleging short payment under the head of erection, commissioning and installation services - Whether service tax demand can be sustained when the assessee has paid appropriate tax on the same services but under different service heads based on the nature of work performed in each invoice – HELD - The Chartered accountant's certificate and detailed invoice records produced by the assessee clearly demonstrate that the assessee had rendered multiple types of services and paid the corresponding service tax at the applicable rates for each category. The evidence shows that the services in dispute fall under different heads including works contract services and erection, commissioning and installation services, and the assessee had accounted for and paid service tax on all services rendered. Since the assessee has paid correct service tax on all services rendered, merely reclassifying them under a different service head does not create a demand - The demand of service tax under erection, commissioning and installation services is set aside - Change in Service Tax Rate - Point of Taxation Rules and applicability of changed service tax rate - The assessee raises invoices before the rate change date of 01.04.2012 when service tax was increased from 10% to 12%, but receives payments for these invoices after this date - Revenue case that service tax be paid at the higher rate of 12% on the ground that payment was received after the rate change - Whether service tax at the higher rate of 12% applies to invoices raised and services rendered before 01.04.2012 when payment is received after that date – HELD - The rate of service tax is determined by either the date of invoice or date of payment, whichever is earlier. Where both invoices and services are provided before 01.04.2012, the point of taxation is the date of invoice under Rule 4(a)(ii), and the older rate applies regardless of when payment is received. Where invoices are raised before 01.04.2012 but services are provided partly before and partly after with advance payment before the rate change, Rule 4(b)(ii) applies and the rate is determined by the earlier of invoice or payment date. Only to the extent that payment is received after 01.04.2012 for invoices raised before this date does the higher rate apply - No additional service tax is payable as the assessee has correctly applied the point of taxation rules and already paid differential tax where applicable.
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