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Non-filing of intimation under Rule 6 of CCR is only procedural and assessee can’t be forced to pay 7% of the value of Exempted Services: CESTAT [Read Order]

Non-filing - intimation - CCR - assessee - exempted services - CESTAT

The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Chennai Bench held that eligibility for refund after reversal or paying of proportionate credit on exempted services by applying for the procedure under Rule 6(3)(i) of the Cenvat Credit Rules, 2004.

The appellant, M/s.Rockey Marketing (Chennai) Pvt. Ltd. had entered into a Business Solutions Agreement and another Business Promotion Agreement with M/s.Amazon Ltd.

As per the Business Solutions Agreement, the appellants have to store various merchandise in the Amazon warehouse and facilitate dispatch of the goods. In this connection, Amazon was providing BSS and warehousing services. Service tax was collected from the appellants by M/s.Amazon for such services provided to appellant.

The appellants utilized input services provided by M/s.Amazon for engaging in trading as well as providing taxable service. From June 2014, they started availing input tax credit for the period commencing from April 2014 and took credit upto October 2015 on the service tax collected from them by M/s Amazon on Business Support Service and Storage and Warehousing services.

They were advised that they were not eligible to avail credit on such service tax paid to M/s Amazon and therefore they, as an abundant caution to avoid penal proceedings, reversed the credit by making cash payment along with interest for the input tax credit availed by them during this period.

This was informed to the department. Later, they obtained legal advice that they would be eligible to take proportionate credit on the taxable services provided by them. Since the appellants had utilized the input services for trading (exempted services) as well as taxable output services, they opted for reversal of proportionate credit as provided under Rule 6 (3A) (ii) of Cenvat Credit Rules, 2004.

As the credit reversed was in excess of the proportionate credit to be reversed, they have filed refund claims of Rs.47,38,050 and Rs.6,17,934 on 17.2.2016, being the balance of credit wrongly reversed (paid in cash) by them.

After due process of law, the original authority rejected the refund claim entirely. In appeal, the Commissioner (Appeals) held that appellants have to reverse/pay credit along with interest as per Rule 6(3A)(i) at the rate of 7% of the value of exempted services and therefore are eligible for refund of only Rs.4,31,586 and appropriate interest.

The two-member bench of C.S. Sulekha Beevi and P. Anjani Kumar observed that the view taken by the Commissioner (Appeals) that the appellant has to reverse credit as per Rule 6(3)(i) is against the provisions of law.

The tribunal held that the appellant would be eligible for refund after reversal / paying of proportionate credit on exempted services by applying Rule 6 (3) (i). This amount however has to be verified.

“The indirect tax regime has been shifted from Service Tax to GST, appellant would be eligible for cash refund of such amount. However, we direct the lower authority to quantify the amount eligible for refund after complying with Rule 6 (3) (i) being the proportionate credit availed on exempted services,” the tribunal said.

The tribunal observed that non filing the intimation under Rule 6 of CCR, 2004 is only procedural and for this purpose the assessee cannot be forced to pay 7% of the value of exempted services.

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