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2023 (9) TMI 135 - AT - Service TaxDenial of utilization of the CENVAT credit for discharging service tax liability - Import of Service - services qualify as output services or not - Denial of inter-adjustment of amount paid within various heads against the liability - Rule 3(4)(e) of the Cenvat Credit Rules, 2004. Denial of utilization of the CENVAT credit for discharging service tax liability in relation to Import of Service - HELD THAT:- The interpretation of Rule 3(4) of the Cenvat Credit Rules, 1994 by the Ld. Commissioner in the impugned order is legally not tenable - an ‘Explanation’ has been added to Rule 3(4)(e) of the Cenvat Credit Rules, 2004, w.e.f.01.07.2012, to the effect that Cenvat credit cannot be used for payment of service tax in respect of services where the person liable to pay tax is the service recipient”. Thus, it is amply clear that there was no such restriction in the Cenvat Credit Rules, 2004, prior to 01.07.2012. The period involved in the present dispute is 2009, which is prior to insertion of the Explanation to Rule 3(4)(e) w.e.f., 1.7.2012. Hence we, hold that such restriction of utilization of Cenvat credit was not applicable for the period under dispute - the utilization of Cevat Credit for payment of service tax on 'import of service' by the Appellant is legally tenable. Denial of inter-adjustment of amount paid within various heads against the liability - HELD THAT:- The Appellant has paid the total tax payable during the disputed period correctly. If the adjustment is allowed between the excess service tax paid and the short paid Education Cess/SHE Cess and vice versa, then there was short payment of Rs. 895,160/- only in the month of January 2008, which has already been paid by them on 5th May 2008. Thus, the contention of the Appellant is that if the adjustment is permitted then there won't be any short payment overall. Accordingly, they contended that the demand confirmed in the impugned order is not sustainable. Thus, the issue to be decided in this case is whether excess /short paid amount under the service tax head can be adjusted for payment of excess/short paid amount in Education Cess or not. A similar issue under Central Excise came before the Hon'ble High Court of Guwahati in the case of UNION OF INDIA VERSUS KAMAKHYA COSMETICS & PHARMACEUTICAL PVT. LTD. [2012 (7) TMI 902 - GAUHATI HIGH COURT], where Hon'ble High Court has held that Cenvat credit of Basic Central Excise duty can be utilzed for payment of Education Cess/SHE Cess and vice versa. The same analogy is applicable for service tax also. Following the decision of the Hon'ble Guwahati High Court, it is held that excess amount paid in service tax can be adjusted against the short payment in Education Cess/SHE Cess. After adjustment, there was a short payment of Rs.8.95.160/- only in the month of January 2008, which has already paid by the Appellant. Accordingly, the demand confirmed in the impugned order on this count is not sustainable. Since both the issues involved in the present appeal are decided in favour of the Appellant, the entire demand along with interest confirmed in the impugned order is liable to be set aside. As the demand is not sustainable, there is no penalty imposable on the Appellant. Accordingly, the impugned order is set aside - appeal allowed.
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