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2016 (8) TMI 93 - RAJASTHAN HIGH COURT

2016 (8) TMI 93 - RAJASTHAN HIGH COURT - 2016 (43) S.T.R. 354 (Raj.) - Availing cenvat credit while claiming exemption notification no. 1/2006-ST - reversal of cenvat credit and payment of service tax with interest by respondent. - Held that:- subsequent reversal of credit even after utilization of the same and clearance of the final product will relate to a situation as if no credit was ever availed, and Tribunal on finding of fact found that the respondent is entitled to full waiver. Findings .....

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this appeal are that the respondent assessee is engaged in providing Erection, Commissioning and Installation Service as defined under Section 65(105) (zzd) of the Finance Act, 1994. During the course of audit it had been observed by the Audit Party that they had provided Erection, Commissioning and Installation Service during the financial years 2007-08 and 2008-09 (up to September 2008) and availed abatement of ₹ 2,12,58,860/- in terms of Notification No. 1/2006-ST dated 1.3.2006 and si .....

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otification No. 12/2003-ST dated 20.6.2003. Since the respondent assessee had availed and utilized cenvat credit under the provisions of Cenvat Credit Rules, 2004, the benefit of abatement under notification No. 1/2006-ST was not admissible in terms of proviso quoted hereinbefore and it was noticed that the assessee has contravened the condition of the provisions of the said Notification. A show cause was issued by the Superintendent of Service Tax Range to deposit the service tax so short paid .....

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accordance with law, accordingly the AA confirmed the service tax, interest as also penalty subject to maximum of the due sales tax demand. 4. The appeal preferred by the assessee resulted into dismissal by the Commissioner of Central Excise (Appeals), who also held that the claim of the assessee was questionable and only on account of the Audit Party that this wrong claim was made known. 5. On a further appeal, the Tribunal accepted the contention of the assessee and held that reversal of credi .....

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hat the claim of cenvat credit was wrongly availed, the Tribunal merely because the amount had been reversed and paid, ought not to have accepted. He contended that such an assessee ought not to have been granted benefit of a wrong done and contended that substantial question of law arises out of the order of the Tribunal. He relied upon Eagle Flask Industries Limited v. Commissioner of C. Ex., Pune 2004 (171) E.L.T. 296 (S.C.), Commissioner of C. Ex., New Delhi v. Hari Chand Shri Gopal 2010 (26 .....

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under the bona fide belief that the claim was admissible and as soon as it was made known of the said factum, immediately without further loss of time bona fides were shown by depositing the cenvat credit along with interest and the order of the Tribunal is just and proper and is not required to be interfered with. He relied upon the judgments in Hello Minerals Water (P) Ltd. v. Union of India 2004 (174) E.L.T. 422 (All.), Commissioner of Central Excise v. Ashima Dyecot Ltd. 2008 (232) E.L.T. 58 .....

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ent of ₹ 2,06,541/- along with interest of ₹ 17,093/- and once they reversed the total credit and deposited the same, they became entitled to the benefit of Notification. The Tribunal further found that subsequent reversal of credit even after utilization of the same and clearance of the final product will relate to a situation as if no credit was ever availed, and Tribunal on finding of fact found that the respondent is entitled to full waiver. 9. The Allahabad High Court in the cas .....

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ad High Court further found that where the specific issue was whether the reversal of credit subsequent to removal of goods was fatal to the extension of benefits of the Notification considered the matter at length and had found that the majority decision of the five member Bench of the Tribunal upheld the argument of the assessee therein and held that reversal of credit subsequent to the clearance of the exempted product is in line with the ratio of the Supreme Court judgment laid down in Chand .....

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(P) Ltd. (supra) are clearly applicable to the present matters. In that case also, the case of the Department was that reversal of credit entries is not permitted by the rules. The assessee is not entitled to remove the copper wires without payment of duty since credit of the duty paid on the inputs used in the manufacture of copper wire had already been taken in accordance with Rule 57A. Once appropriate entries have been made in the register, there is no rule under which the process could be r .....

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