By TIOL News Service

MUMBAI, NOV 21, 2015: THE appellant is registered with Service Tax department as a provider of Banking and other Financial Services. They had availed CENVAT Credit of the tax paid on Input services received by them.

Some of the output services like Overdraft facility, cash credit facility, discounting of bills, bills of exchange or cheques were partially exempted vide Notification No. 29/2004-Service Tax. The notification exempted so much of the value of taxable service provided to a customer in relation to overdraft facility; cash credit facility; or discounting of bills, bills of exchange or cheques, as is equivalent to the amount of interest on such overdraft, cash credit or, as the case may be, discount, from the service tax leviable thereon under section 66 of the said Act, subject to the condition that the said interest amount is shown separately in an invoice, a bill or, as the case may be, a challan issued for this purpose.

A SCN dated 13.06.2013 was issued for the period April, 2008 to March, 2011 alleging that the appellant having availed input tax and the output services being partially exempted they were required to either maintain separate accounts or pay an amount of @ 6% under Rule 6(3), on the exempted portion of the service.

The Additional Commissioner confirmed the demand of Rs.5,53,861/- along with interest and penalties.

In appeal, the appellant submitted that since they had reversed the total amount of CENVAT credit availed for the common input service along with interest there was no question of any amount payable u/r 6(3) of the CCR, 2004. The Commissioner (Appeals) rejected this claim and upheld the o-in-o by relying on the decision in Nicholas Piramal (India) Ltd. - 2009-TIOL-649-HC-MUM-CX.

The appellant is before the Tribunal.

Adverting to the definition of "exempt service" contained in rule 2(e) of the CCR, 2004, the appellant submitted that rule 6(3) is not attracted. They also cited the decision in Nagar Urban Co-operative Bank Ltd. - 2014-TIOL-929-CESTAT-MUM which considered the ruling in Josts Engineering Co. Ltd. - 2013-TIOL-732-CESTAT-MUM & Nicholas Piramal (supra) and submitted that in view of the retrospective amendment by the FA, 2010, reversal of credit by the assessee of the entire common input service credit taken along with interest amounts to non-availment of credit and, therefore, the provisions of Rule 6(3) of CCR, 2004 are not attracted.

The AR reiterated the stand of the department but did not dispute the rulings relied upon by the appellant.

The Bench observed -

"4. …, I find that the issue is fully covered by Josts Engineering (supra) and also in the case of Nagar Urban Co-operative Bank Ltd. (supra). I find that the appellants case is squarely covered as in earlier order No. A/1218/14/SMB/C-IV dated 14.07.2014 in Appeal No. ST/86481/14-Mum. Further, the aforementioned ruling was not available before the adjudicating authority at the time of passing of the impugned order and these rulings were pronounced subsequently. In this view of matter and after recording the finding that the appellants case are covered by these two rulings, I remand the matter back to the adjudicating authority with a direction to verify the amount of CENVAT Credit reversed. If the same is found to be short then the appellant may be allowed an opportunity to reverse the balance amount alongwith interest. It is also held that the Banking and other Financial Service, which are the output service of the appellant are not fully exempted and accordingly, do not fall under the category of exempt service as defined under Rule 2(e) of the CENVAT Credit Rules, 2004."

The appeal was allowed by way of remand.

(See 2015-TIOL-2471-CESTAT-MUM)