ST - Notification 1/2006 - Reversal of CENVAT credit along with interest at later date also amounts to non-availment of credit - Benefit of exemption available: CESTAT
By TIOL News Service
NEW DELHI, JUNE 28, 2015: THE appellant is providing tour operator service.
Upon realizing that they are not entitled for the benefit of the notification 1/2006-ST as they had availed CENVAT credit, the appellant immediately deposited the amount of credit availed during the period April, 2006 to March, 2007 along with interest on 03.10.2007 and intimated the Department on 04.10.2007.
A Service Tax demand of Rs.1.29crores was confirmed against the appellant by denying the benefit of Notf. 1/2006-ST on the ground that the assessee had availed CENVAT credit of the duty/tax paid on inputs/capital goods and input service. There is also another demand of interest of Rs.12,138/- under Section 75 of the FA, 1994 for delayed payments of service tax - it is the case of the department that the appellant had not paid ST on due dates - for the intervening period from the date of deposit of cheque into the credit of treasury till its realisation.
Before the CESTAT, the appellant submitted that the reversal of CENVAT credit amounts to non-availment of credit and consequently they are entitled for the benefit of the notification 1/2006-ST. Reliance is placed inter alia on the decision in Hello Minerals Water (P) Ltd.- 2004-TIOL-57-HC-ALL-CX. In the matter of the demand of interest, it is submitted that as per Rule 6(2A) of STR, 1994, the appellant is not required to pay the interest since as per the said Rule, the appellant has deposited the cheque on the due date and same is the date of payment of service tax subject to realisation of the said cheque.
The AR opposed the contention of the appellant by submitting that in view of the apex court decision in Chandrapur Magnet Wires (P) Ltd.- 2002-TIOL-41-SC-CX only if the credit has been reversed before the point of taxation then the same shall amount to non-availment of CENVATcredit. Inasmuch as since in the instant case the appellant has utilized the credit for payment of service tax and reversed the credit availed during the period April 2006 to March 2007 on 03.10.2007,they are not entitled to avail the benefit of the notification 1/2006-ST. Reliance is placed on the decision in Hind Lamps Ltd.- 2009-TIOL-2000-CESTAT-DEL. The demand of interest on the late payment of ST is also correctly confirmed, submitted the AR.
The Bench adverted to the decision in Hello Minerals Water (P) Ltd. and observed that in view of the same, the argument by the AR that if reversal is made before point of taxation, only then the tax exemption is availableis not acceptable.
Noting that a similar issue had come before the Tribunal in the case of Khyati Tours & Travels , wherein the Tribunal has held that if the assessee has reversed the Cenvat credit availed along with interest, the same shall amount to non-availment of Cenvat credit, the Tribunal held that the appellant is entitled for the benefit of exemption Notification No.1/2006-ST ibid.
The demand of Service Tax of Rs.1.29crores was set aside along with the interest and equivalent penalty.
In the matter of payment of ‘interest' for alleged delay in payment of tax, the Bench reproduced the provisions of rule 6(2A) of STR, 1994 and observed thus -
"Admittedly, in this case, the appellant has paid the service tax through cheque on due dates and the same stand realised on a later date. Therefore, the date of deposited the cheque into the treasury is the date of payment of service tax as per Rule 6(2A) of the said Rules. In these circumstances, we hold that the appellant has paid the service tax in time. Consequently, demand of interest on delayed payments is not sustainable."
Both the issues were answered in favour of the appellant. Therefore, demand was set aside and the appeals were allowed.
(See 2015-TIOL-1259-CESTAT-DEL)
