The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand, thereby granting relief to M/s. Rajasthan Renewable Energy Corporation Limited, the appellant.
The appellant, a Rajasthan Government undertaking formed by merging the Rajasthan Energy Development Agency and the Rajasthan State Power Corporation Ltd., is a State Nodal Agency for promoting and developing non-conventional energy sources in the State of Rajasthan and is also a State Designated Agency for enforcement of the provisions of the Energy Conservation Act, 2001.
In September 2013, the Audit team of the Service Tax Department conducted an audit of the appellant and raised multiple demands for recovery of service tax and CENVAT credit. The department issued a show cause notice placing reliance on the allegations raised in the Audit report and raised demands against the appellant.
The appellant, however, received a second show cause notice alleging that the declaration filed by the appellant was ‘substantially false’ as the tax dues amount during the audit was Rs. 10 crores and the appellant only declared Rs. 1 crore as tax due in the declaration.
The first contention advanced by the counsel for the appellant was that as the entire CENVAT credit availed by the appellant stood reversed, it would amount to non availment of CENVAT credit. The Counsel further submitted that the provisions of rule 6(3) of the Credit Rules would apply only when an assessee desires to avail and utilize CENVAT credit pertaining to common input services but as the appellant had reversed the entire CENVAT credit, the options contemplated in rule 6(3) of the Cenvat Credit Rules would not be applicable.
The third contention advanced by the counsel for the appellant was that electricity was not an ‘exempted’ and ‘excisable’ good. The next submission advanced by the counsel for the appellant was that the appellant had discharged the service tax liability in accordance with law and there was no short-payment.
The Coram comprising Justice Dilip Gupta, President and Hemambika R Priya, Technical Member held that “Thus, the impugned order passed by the Commissioner confirming the demand of service tax proposed in the show cause notice cannot be sustained and is liable to be set aside.”
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