2011 (3) TMI 1193 - AT - Central Excise

Inputs service tax credit on both the dutiable as well as exempted final products - non maintanence of any separate account - assesssee reversed the inadmissible inputs service tax credit later on they paid the interest also - Held that - Considering the submissions made by the Ld. Advocate of assessee that they have reversed the input service tax credit availed on exempted final product and paid the interest. As per Section 73 of the Finance Act 2010 the Rule 6 of the Cenvgat Credit Rules 2004 was amended and the assessee was given this benefit with retrospective effect which is applicable in the during the impugned period. Therefore it would be appropriate in the interest of justice to examine this aspect by the original adjudicating authority - appeal is allowed by way of remand.

Summary

Issues: Appellants claiming input service tax credit on both dutiable and exempted final products without maintaining separate accounts during 2006-2008.

Analysis:
The issue in this case revolves around the appellants claiming input service tax credit on both dutiable and exempted final products without maintaining separate accounts during the period 2006-2008. It was noted during an audit that the appellants had not maintained separate accounts for the input service tax credit availed. Subsequently, the appellants reversed the inadmissible credit and paid the interest. The Ld. Advocate for the appellant argued that Rule 6 was amended by Section 73 of the Finance Act, 2010, with retrospective effect, and the appellants had complied with the provisions by reversing the credit. Therefore, the matter should be remanded to the adjudicating authority for verification and appropriate order.

The Tribunal, after considering the submissions, found that the issue was narrow in scope. Both parties agreed to final disposal of the appeal after waiving the pre-deposit of demand. The Ld. Advocate reiterated that the appellants had reversed the input service tax credit on exempted final products and paid the interest, citing the retrospective effect of the amendment to Rule 6 by Section 73 of the Finance Act, 2010. The Tribunal acknowledged the retrospective applicability of the amendment and deemed it necessary for the adjudicating authority to reexamine the facts in light of the Finance Act. Consequently, the Tribunal set aside the impugned order and allowed the appeal by way of remand, directing the adjudicating authority to review the submissions and issue an appropriate order after providing the appellant with a hearing opportunity.

In conclusion, the Tribunal's decision to remand the matter to the adjudicating authority for a detailed examination in accordance with the retrospective amendment to Rule 6 highlights the importance of complying with tax credit regulations and the significance of maintaining accurate records to avoid disputes regarding input service tax credit claims on exempted final products.