2026-VIL-953-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Cenvat Credit Entitlement under Rule 6(3B) of Cenvat Credit Rules, 2004, Demand invoking extended period of limitation – Appellant-NBFC availed input service credit on manpower services supplied by service providers, which were commonly used across all business verticals - Department alleged that such credit was ineligible as the manpower services were exclusively used for insurance auxiliary services and mutual fund distribution services on which service tax was paid by recipients under RCM or which were exempt services, thereby disqualifying them as input services under Rule 2(l) of Cenvat Credit Rules, 2004 - Whether a non-banking financial company (NBFC) is entitled to claim cenvat credit on input services used for providing insurance auxiliary services and mutual fund distribution services – HELD - The Rule 6(3B), which begins with a non-obstante clause, provides that notwithstanding anything contained in sub-rules (1), (2) and (3) of Rule 6, a banking company and NBFC shall pay an amount equal to fifty percent of the cenvat credit availed on inputs and input services in that month. The non-obstante clause gives overriding effect to Rule 6(3B) over contrary provisions in sub-rules (1), (2) and (3), including the prohibitions in Explanations II and III to Rule 6(3) regarding disallowance of credit on services used exclusively for exempted services or services that are not input services - The legislature has provided a presumptive mechanism under Rule 6(3B) requiring mandatory reversal of fifty percent of credit without requiring detailed determination of specific entitlements. The Larger Bench in South Indian Bank case held that once reversal of fifty percent credit is made under Rule 6(3B), banks and financial institutions are entitled to the benefit of the entire amount of service tax paid on input services having nexus with provision of output services, irrespective of whether such services are used for taxable or exempt output services - The impugned order is set aside and the appeal is allowedrnrnInvoking of extended period of limitation – HELD - The extended period of limitation cannot be invoked as the relevant facts were already known to the authorities through earlier show cause notices and tribunal orders for preceding periods, and therefore subsequent demands cannot be based on the same facts treated as suppression. Additionally, the issue involves interpretational disputes regarding cenvat credit rules, and in the absence of deliberate act or wilful suppression with intent to evade on the part of the appellant, the essential precondition for invoking extended period of limitation is not satisfied
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