2016 (11) TMI 580 - AT - Service Tax

CENVAT credit - output service of maintenance and repair - Held that - We find that going by the wording of the said Notification No.12/2003, there is no requirement of payment of VAT to become eligible for exemption in respect of said goods for availing the benefit of Notification No.12/2003. The notification provides that there should be documentary proof indicating the value of the goods sold so as to avail benefit of exemption of such value from the assessable value for arriving at service tax. This crucial aspect was not properly understood by the Original Authority. We, therefore, hold that the requirement of actual payment of VAT is not to be taken into consideration for extending the benefit of said Notification No.12/2003, but it is only to be examined whether documentary proof indicating the value of goods sold, is available on record to extend the said benefit. Further, the Original Authority has not taken into consideration the provisions of Rule 6(3) of Cenvat Credit Rule 2004, that existed during the material period allowing the Cenvat Credit to the appellants. So, we direct Original Authority to re-adjudicate the matter taking into consideration the documentary proof of sale of goods and taking into consideration the provisions of said Rules 6(3) available during the material period. With these directions, we remand the matter back to the Original Authority by setting aside the Order-in-Original. The issue of limitation is kept open to be examined by the Original Authority. The appeal is allowed by way of remand.

Summary

Issues:
Challenge to Order-in-Original dated 18.08.2011 regarding service tax liability, Cenvat Credit, and penalties under Section 73 of Finance Act, 1994 and Rule 14 of Cenvat Credit Rules. Eligibility for benefit of Notification No.12/2003 and Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The case involved M/s Capital Cars Pvt. Ltd. challenging Order-in-Original No.01/COMMR./GZB/ST/2011-12 dated 18.08.2011 before the Appellate Tribunal CESTAT ALLAHABAD. The appellant, a dealer and service provider for maintenance of Honda Cars, was issued a show-cause notice for selling parts during servicing, leading to a service tax liability of &8377; 4,74,12,925 under Section 73 of Finance Act, 1994. Additionally, Cenvat Credit of &8377; 21,11,299 was proposed for recovery under Rule 14 of Cenvat Credit Rules, along with interest and penalties. The appellant claimed the benefit of Notification No.12/2003-ST dated 20th June, 2003, stating that the value of goods sold during servicing was exempt from service tax. The Original Authority denied this benefit, citing lack of VAT payment proof on goods sold, and confirmed the service tax demand and penalties.

The appellants challenged the Order-in-Original on the grounds of eligibility for Notification No.12/2003 and Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004. The Tribunal analyzed the wording of Notification No.12/2003 and clarified that actual VAT payment was not a prerequisite for exemption, but rather the availability of documentary proof indicating the value of goods sold. The Tribunal noted that the Original Authority failed to consider Rule 6(3) of Cenvat Credit Rule 2004, which allowed Cenvat Credit to the appellants during the material period. Consequently, the Tribunal directed the Original Authority to re-adjudicate the matter, considering the documentary proof of goods sold and the provisions of Rule 6(3) applicable during the material period. The issue of limitation was left open for examination by the Original Authority, and the appeal was allowed by way of remand, setting aside the Order-in-Original.

In conclusion, the Tribunal's decision emphasized the importance of documentary proof for availing exemptions under Notification No.12/2003 and highlighted the need to consider relevant Cenvat Credit Rules for determining eligibility. The case was remanded for further consideration by the Original Authority, with a focus on these key aspects.