TMI Blog2006 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... lization of credit under Rule 3(5) of Service Tax Credit Rules, 2002. The adjudicating authority confirmed the demand of Rs. 3,01,932/- along with interest and imposed penalty of Rs. 100/- per day under Section 76 of the Chapter V of the Finance Act, 1994. On appeal, they were not successful. The Commissioner (Appeals) held that the availment of credit in terms of Rule 3(5) to the extent of 35% of amount payable has to be made with reference to periodical liability. Consequently an effective restriction was imposed, as a result of which accumulated credit cannot be used beyond 35% of the amount payable for each month/quarter when such payment is due. He has observed that Rule 4(1) of the Credit Rule does not come to the rescue of appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he credit vis-a-vis payment of service tax on output services. (iii) It is settled law that the credit is indefeasible and there is no time limit within which the credit is to be utilized. So long as the utilization of the input service credit does not exceed 35% of the service tax payable on output service, there is no violation of Rule 3(5) of the Service Tax Credit Rules, 2002. (iv) CBEC through Circular No. 77/7/2004-S.T. dated 10-3-2004 [2004 (165) E.L.T. T21] has clarified that the input service tax credit can be utilized only to the extent of 35% of the total service tax payable on all the taxable output services. The Board has not laid down any restriction or clarified the utilization of 35% of the credit is on each occasion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay service tax including persons who fail to pay such tax for any period of time beyond due date. (vii) The appellants were under bona fide belief that they could utilize the credit at any time so long as the credit was utilized to the extent of 35% of the service tax payable. Show cause notice does not allege that there was any intention to evade payment of service tax. Therefore, there is no cause for imposition of penalty. (viii) Interest is liable to be paid only when there is a delay in payment of service tax under Section 78. The appellants have paid the service tax in terms of Section 78 of the Finance Act, 1994. Since there is no provision of Section 68, the demand of Interest under Section 78 is not correct in law. The same d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t service. However, there is a provision under Rule 3(5) of the Service Tax Credit Rules, 2002 by which the service provider can opt not to maintain separate accounts. In such circumstances, what are his obligations? In order to understand the same, we are reproducing the Rule 3(5) of Service Tax Credit Rules, 2002 herein below :- "(5) In case the service provider opts not to maintain separate accounts of input service meant for consumption in relation to rendering of such output services which are chargeable to service tax as well as exempted services or non-taxable services, he shall be allowed to utilize service tax credit for payment of service tax on any output service only to the extent of an amount not exceeding thirty five percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the credit accumulated during the month should be used in the same month. In fact no time frame has been fixed in the rules. In these circumstances, the utilization of credit to the extent of Rs. 4,94,494/- during December 2003, January 2004, February 2004 and March 2004 is in order and in consonance with Rule 3(5) of the Cenvat Credit Rules, 2002. The statement showing availment and utilization of input credit by the appellants is also incorporated in this order for proper appreciation of facts Statement Showing Availment and Utilisation of Input Service Credit for discharge of Service tax on output service during the period May 2003 to March 2004 Period Input Credit Availed Service Tax payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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