Under Service Tax law, the Assessee is not prohibited from paying tax on services exempted under a notification – there is no provision akin to Section 5A(1A) of the Central Excise Act, 1944
M/s Deloitte Haskins and Sells (the Appellant) is a firm providing services of practising Chartered Accountant and Management Consultancy services to clients in India and abroad. The Appellants were operating from the different locations, each with a separate Service tax registration number and the accounting operations were carried out from Worli address (registered unit).
The Department alleged that the services rendered by the Appellant during the period under dispute were exempted under Notification No. 04/2004-ST dated March 31, 2004 (which provides exemption to services provided to SEZ units) [Notification 4/2004] and Notification No. 25/2006 dated July 13, 2006 (which provides exemption to services relating to representation before the statutory authorities) [Notification 25/2006].
Accordingly, the Appellant has wrongly availed Cenvat credit while providing exempted services as well as taxable services in violation of the Cenvat Credit Rules, 2004 (the Credit Rules) as the Appellant did not maintain separate records for the exempted and taxable services in terms of Rule 6(1) of the Credit Rules. Therefore, as per Rule 6(3)(c) of the Credit Rules (as was prevalent during the period under dispute), the Appellant could utilize Cenvat credit only to the extent of 20% of the amount of Service tax payable on their output services. Hence, the Appellant was required to pay Rs. 2,78,23,485/- in terms of Rule 6(3)(c) of the Credit Rules.
It was further alleged that the Appellant has also irregularly availed Cenvat credit of Rs. 5,65,000/- and Rs. 31,25,737/-on the strength of invoices raised on the registered unit at Worli whereas the Cenvat credit was taken in another registered unit at Mafatlal House, Mumbai.
Being aggrieved, the Appellant filed an appeal before the Hon’ble CESTAT, Mumbai submitting as under:
The Hon’ble CESTAT, Mumbai held as under:
Thus, the matter was remitted back to the Commissioner for verifying that the Inputs services in respect of such invoices were actually used in the Mafatlal House office and not in the Worli office.;
Thus, the Hon’ble Tribunal decided the matter in favour of the Appellant by holding that the Appellant had not provided exempted and taxable services in terms of Rule 6(2) of the Credit Rules and therefore the restriction of availment of Cenvat credit up to 20% of the value of taxable output services would not apply.