Assessee Liable To Pay Interest On Short Reversal Of Common Cenvat Credit Used For Exempted Services: CESTAT

The Bangalore Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has stated that assessee liable to pay interest on short reversal of common cenvat credit used for exempted services. The question before P.A. Augustian (Judicial Member) and R. Bhagya Devi (Technical Member) was whether interest liability arises on the short reversals of the cenvat credit availed by the assessee on the exempted services. In this case, the assessee/appellant being an 100% Export Oriented Unit (EOU) was availing cenvat credit of service tax paid on various input services used for providing both taxable as well as exempted services. As per Rule 6(3A)(c)(iii) of the Cenvat Credit Rules, 2004 the assessee was to reverse the ineligible cenvat credit as per the provisions laid down on or before 30th June of the succeeding financial year and where the amount to be reversed was short-paid, he was liable to pay interest from the due date till the date of payment. From the returns filed by the assessee, it was noticed that assessee had short reversed certain credit amounts hence, interest was demanded. The impugned order, accordingly, demanded differential amount of Rs.8,75,04,359/- and also appropriated the amount paid and demanded interest of Rs.52,93,414/- under Rule 6(3A)(e) of the Cenvat Credit Rules, 2004. The assessee submitted that as per Rule 14 of the Cenvat Credit Rules, 2004, interest is liable to be paid on wrong availment and utilization of cenvat credit. Since the assessee had sufficient balance in his credit ledger the question of payment of interest does not arise. The revenue submitted that the assessee was in the first place not eligible to avail cenvat credit attributable to exempted goods/services, however, the provisions allowed them to avail the cenvat credit on both dutiable and exempted goods/services provided the cenvat credit availed on the exempted goods/services was reversed as per the provisions of Rule 6(3A). These Rules also provide payment of interest whenever there is short reversal. The Tribunal observed that the assessee's argument on Rule 14 of the Cenvat Credit Rules, 2004 has no role to play since the interest provisions as per Rule 6(3A) are specific with regard to common credit used in dutiable and exempted goods/services. The Tribunal opined that when specific provisions are provided under Rule 6(3A) of the Cenvat Credit Rules 2004 on ineligible cenvat credit availed by the assessee on exempted goods which demands reversal of credit on or before 30th June of 2009, the assessee had to reverse the same and the provisions also specifically provide for payment of interest under Rule 6(3A) in case of delay. The assessee/appellant is liable to pay interest from the stipulated date till the reversal of credit, stated the bench. In view of the above, the Tribunal dismissed the appeal. Case Title: IBM India Private Limited v. Commissioner of Service Tax Case Number: Final Order No. 21279/2025 Counsel for Appellant/ Assessee: Priyanka Rathi Chinmayi Counsel for Respondent/ Department: Rajesh Shastry, Superintendent (AR) Click Here To Read/Download The Order

Assessee Liable To Pay Interest On Short Reversal Of Common Cenvat Credit Used For Exempted Services: CESTAT

Mehak Dhiman

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