Rule 6 of CENVAT Credit Rules applies Liability to Reverse Proportional Credit: CESTAT Rules in Bank of India matter [Read Order]
CESTAT reiterated that a substantial benefit cannot be denied merely for not following a procedural requirement.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, decided in a Bank of India matter that Rule 6 of CENVAT Credit Rules applies liability to reverse proportional credit.
M/s Bank of India, the appellant, is a Public Sector Bank and rendering both taxable and exempted services. It has availed CENVAT Credit in respect of various input services. A show cause notice dated 05.01.2010 was issued to the appellant, denying CENVAT Credit and proposing recovery thereof, demanding service tax along with interest and penalty thereon.
The Chartered Accountant appearing on behalf of the appellant submitted that the Revenue has quantified the said 20% limit on a monthly basis which is not specified in any of the CENVAT Credit Rules. Further submitted that, the Head Office of the appellant has obtained Registration as ‘Input Service Distributor’ in the year 2004.
Finally, another submission was that the option exercised by them should be considered as the reversal of proportionate CENVAT Credit attributable to exempted services.
The tribunal observed that the appellant has complied with the provisions of Rule 6(3)(c) of the CENVAT Credit Rules. CESTAT reiterated that a substantial benefit cannot be denied merely for not following a procedural requirement.
The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) finally remanded the matter on the issue of quantifying the proportionate credit liable to be reversed by the appellant, along with applicable interest.
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