The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the assessee can either claim Cenvat credit or claim refund under excise notification and set aside the penalty for wrong availment of Cenvat credit.
M/s. CPC (P) Ltd, the appellants hold Central Excise registration as well as Service Tax registration. During the scrutiny of CENVAT documents, it was noticed that the appellant has availed input service credit attributable to the service tax paid to various CHA services about their exports.
Notification No.41/2007-ST dated 06-10-2007 provides an exemption from service tax on specified services, including CHA services by way of applying for a refund of the service tax paid by the exporter provided no CENVAT credit on the service tax paid is availed.
The department noticed that the appellant, instead of applying for a refund of the service tax paid on CHA service tax had availed CENVAT credit of the same which was not eligible. Show cause notice was issued to the appellant to recover the wrongly availed CENVAT credit along with interest and also for imposing penalties.
After due process of law, the original authority dropped the proceedings holding that the appellant is eligible to avail of CENVAT credit. Against such an order, the department filed appeals before the Commissioner (Appeals) who set aside the order and allowed the appeals filed by the department holding that the appellants are not eligible to take the credit and should have applied for a refund.
The appellant submitted that as per clause (d) of the proviso to para 1 of the Notification No.41/2007-ST, to claim a refund, the assessee should not avail of CENVAT credit. This condition would indicate that there is an option for the manufacturers either to avail of credit or to claim a refund. The appellants have availed the credit instead of claiming a refund and therefore ought to be allowed.
It was viewed that as per clause (d) of the proviso, it is seen that the manufacturer shall not avail of CENVAT Credit if a refund claim is filed under the said Notification. It implies that the manufacturer has the option to avail of credit instead of filing a refund.
A two-member bench comprising Ms Sulekha Beevi C S, (Judicial) and Mr M Ajit Kumar, (Technical) held that “ the appellant is entitled to avail Cenvat credit in respect of commission paid to the commission agent based abroad and the impugned order is liable to be set aside and we allow the appeal by setting aside the impugned order with consequential relief, if any.”
The CESTAT while allowing the appeal, set aside the impugned. Mr. R. Balagopal appeared on behalf of the appellant and Ms. Anandalakshmi Ganeshram appeared on behalf of the respondent.
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