Eureka Stock & Share Broking Services Limited vs. Commissioner of Service Tax - (Customs, Excise and Service Tax Appellate Tribunal) (11 Jun 2024)

Mere non-filing of the option letter should not be used to deprive the assessee from reversing the proportionate Cenvat Credit

MANU/CK/0166/2024

Service Tax

The Appellant is engaged in providing "stock broking service" to their clients. On scrutiny of ST-3 Returns as well as cenvat credit records, it revealed that the Appellants have taken cenvat credit on common input services i.e. rent, banking, telephone, repair & maintenance, insurance, postage & courier, audit fees, internet broadband services, professional fee, software charges etc. These input services are used for providing output services, which are chargeable to tax as well as exempted services. During the said period, the Appellant did not maintain separate account for receipt and use of input services for provision of such exempted service and for provision of taxable output service. Accordingly, in terms of Rule 6 (3) of the Cenvat Credit Rules, 2004, they are required to pay 5%/6% of the value of exempted services.

Two show-cause notices were issued to the Appellant for payment of amount equal to 5%/6% of the value of exempted services.The appellant contested the show-cause notices, but the adjudicating authority passed the impugned order holding that, the Appellant is required to pay the amount equal to 5%/6% of the value of exempted services in terms of Rule 6 (3) of the Cenvat Credit Rules, 2004.

Although the Appellant is maintaining separate account for exempted as well as taxable services and reversed the proportionate cenvat credit attributable to the exempted services. For transaction charge services, the service tax paid by the Appellant was not proportionately reversed by the Appellant. But on pointing out by CERA audit, the Appellant has reversed the same. The same has been recorded by the adjudicating authority in the impugned order.

Further, as the Appellant has already reversed the proportionate cenvat credit attributable to exempted services, the Appellant is not required to pay any amount equal to 5%/6% of the value of the exempted services. The same view has been taken by this Tribunal in the case of Chryso India Private Limied Vs. Commissioner of CGST & Central Excise.

From the decisions of the Tribunals, it is seen that even prior to Rule 6 (3AA) coming into effect from 1st April, 2016, they have been taking the view that mere non filing of the option letter should not be used to deprive the assessee from reversing the proportionate Cenvat Credit. The very fact that the Rule 6 (3AA) has been brought into effect from 1st April, 2016 wherein the Adjudicating Authority is empowered to allow the assessee to reverse the Cenvat on proportionate basis on being pointed out, shows the legislative intent to allow the assessee to pay proportionate Cenvat Credit as the first option.

The demand confirmed for Rs.2,52,853 in terms of Rule 6(3)(i), i.e. on 5%/6% of value of exempted goods is not sustainable and the same is set aside. As the Appellant has already reversed the proportionate input cenvat credit attributable to exempted services, in that circumstance, the appellant is not liable to pay an amount equal to 5%/6% of the value of the exempted services. As no demand is sustainable against the Appellant, no penalty is imposable on the appellant. The impugned order is set aside. Appeal allowed.

Tags : DEMAND PENALTY LEGALITY