By TIOL News Service

BANGALORE, FEB 01, 2016: THIS appeal is filed by the revenue challenging the order passed by the Customs, Excise & Service Tax Appellate Tribunal, South Zone, Bangalore in ST/3565/2001-DB dated 27.05.2014 - 2014-TIOL-1945-CESTAT-BANG

The respondent is a banking company providing banking and other financial services under Section 65(12) of the Finance Act, 1994. The respondent is providing both taxable and exempted services. During the course of verification of input tax credit availed by respondent, it was observed by the authorities that the respondent had shown certain services namely, house keeping services, man power, recruitment services, credit card services, ATM services under the category of management, maintenance or repair service and technical and analysis service etc. which are one of the services specified in Rule 6(5) of the CENVAT Credit Rules. The respondent department noticed that the respondent had wrongly utilized credits of service tax paid on these services to the extent of 100% of the amount of service tax payable on taxable output services for the period up to 31.3.2008 and for the period from 1.4.2008, they had not proportionately reversed the credit attributable to the exempted services. The order in original came to be passed after hearing the respondent, reducing the amount originally proposed/demanded in the show cause notice to Rs.81,23,732/- from Rs.2,15,14,945/- and the demand in respect of wrong classification of services under Rule 6(5) of the Rules to Rs.20,62,224/- from Rs.56,68,210/-. Interest and penalty were demanded on this amount in terms of the Rules read with Section 78 of the Finance Act, 1974.

Aggrieved by this order, the respondent preferred an appeal before the CESTAT in ST/35/665/2012. The CESTAT rejected the appeal as regards the normal period, in respect of wrong classification of services and directed the assessee to make the payment of Rs.3,71,501/- and interest of Rs.4025/-. Thus, the appeal was partly allowed by the Tribunal.

Revenue is in appeal before the High Court.

After hearing both sides, the High Court held:

+ It is also noticed by us that the Tribunal without following the statutory provisions contemplated under the Act, proceeded to direct the assessee to make the payment of Rs. 3,71,501/- towards the amount due for the normal period with interest of Rs.4025/- for a month and closed the matter as said to have been suggested. The Tribunal proceeded to pass the order based on sentiments which is uncalled for, particularly, while adjudicating the revenue matters.

+ In the given circumstances, we are of the opinion that it would be appropriate to remand the matter back to the Original Authority to consider the matter afresh after providing an opportunity of being heard to the parties.

(See 2016-TIOL-179-HC-KAR-ST)