2013 (12) TMI 1621 - AT - Service Tax

Summary

Issues involved:
The issues involved in this case are related to the maintenance of separate accounts for the utilization of CENVAT credit, the imposition of service tax demand, interest, and penalty, and the compliance with Rule 6 of Cenvat Credit Rules, 2005.

Maintenance of Separate Accounts:
The appellant claimed to have maintained separate accounts for services exclusively used for taxable services and common services used for both taxable and non-taxable services. The Chartered Accountant submitted that the appellant fulfilled the obligation under Rule 6(2) of Cenvat Credit Rules, 2005. Despite the Commissioner (Appeals) finding no separate accounts were maintained based on an audit report, the Tribunal held that in the absence of contrary evidence, the claim of maintaining separate accounts and the Chartered Accountant's certificate should be accepted.

Compliance with Rule 6 of Cenvat Credit Rules, 2005:
The original adjudicating authority observed a lack of categorical declaration in ST-3 returns regarding the maintenance of separate accounts. However, the Tribunal noted that Rule 6(2) does not require a declaration in ST-3 returns for maintaining separate accounts. The Tribunal emphasized that the requirement of declaration in ST-3 returns does not flow from the statute but from the lower authorities' interpretation.

Imposition of Service Tax Demand, Interest, and Penalty:
The audit report led to proceedings against the appellant for a service tax demand, interest, and penalty due to the alleged non-maintenance of separate accounts. The appellant, while not contesting the service tax demand and interest, sought a waiver of the penalty. The Tribunal found no case for the imposition of penalty, considering the appellant's claim of maintaining separate accounts and the lack of contrary evidence. The appeal was allowed with consequential relief to the appellants.

This judgment highlights the importance of maintaining separate accounts for CENVAT credit utilization, clarifies the compliance requirements under Rule 6 of Cenvat Credit Rules, and emphasizes the need for evidence to support findings in tax proceedings.