2018 (12) TMI 426 – CESTAT HYDERABAD – TMI – CENVAT Credit – common inputs and input services used of manufacture of goods as well as for taxable and exempt service – non-maintenance of separate records – Rule 6(3A) of CCR 2004 – Extended period of limitation – Held that:- The intention of the Legislature was that a manufacturer or a service provider should not avail the entire CENVAT credit of the service tax paid on common input services and should avail proportionate credit attributable to the taxable output service for which the CENVAT credit Rules provides for maintaining separate accounts.
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Appellant herein has followed this rule by taking the credit of only an amount which is attributable to the taxable services provided by him and not availing the CENVAT credit of the input services which are attributable to the trading activity. By availing only the CENVAT credit of the service tax paid attributable to the taxable services, in my view, appellant had complied with the pr
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s appeal is directed against Order-in-Appeal No. HYD-EXCUS-MD- AP2-0228-17-18-CE, dated 25.01.2018. 2. The relevant facts that arise for consideration are appellant herein is the manufacturer and sale of steel doors and also provides taxable services; is engaged in trading of hardware items. Appellant availed CENVAT credit of common input services as also input services and inputs; had not availed CENVAT credit of service tax paid on services utilised for exempted services and reversed the CENVAT credit attributable to trade activity based upon the turnover as provided under Rule 6(2) of Cenvat Credit Rules, 2004. It is the case of Revenue that appellant having not maintained separate accounts for the input services used for taxable and non-taxable services, is required to pay an amount as provided under Rule 6(3A) of CCR 2004. Appellant in his reply to the show cause notice pointed out that they had in fact availed CENVAT credit of the common input services attributable to the taxable
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hipping Services Pvt. Ltd. [2018(9) TMI 922-CESTAT-Bangalore]. It is his submission that the first appellate authority has tried to deviate/distinguish the judgment of the Tribunal in the case of Sify Technologies Ltd. only on the ground that the provisions of Rule 6(2) were worded differentially at that time and used differentially during the period in question in this appeal. He draws my attention to the provisions of Rule 6(2) which is to be interpreted in the case in hand. He would submit that they are covered by the provisions of Rule 6(2). Further, it is his submission that the demands are hit by limitation as the extended period is invoked for demanding ineligible CENVAT credit and that during the period in question, appellants filed returns with the authorities regularly and audit has taken place and the decision of the Tribunal in the case of Sanjay Automobile Engineering Pvt. Ltd. is on the same issue wherein the Tribunal took a view that if one audit is carried out then the
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the CENVAT credit, attributable to the trading activity (exempted services) on a mathematical formula which was followed by him which is the turnover of the trading activity of the total turnover multiplied by CENVAT credit availed on common input services, that every month they have been filing the returns with the authorities giving all the details of such reversals; that many audits have taken place in the factory premises and only in subsequent audit, had brought out this anomaly. 6. Relevant provisions of Rule 6 which is applicable for the period in question, needs to be reproduced which is as under: 6(1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule(2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that
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lature was that a manufacturer or a service provider should not avail the entire CENVAT credit of the service tax paid on common input services and should avail proportionate credit attributable to the taxable output service for which the CENVAT credit Rules provides for maintaining separate accounts. In my view, appellant herein has followed this rule by taking the credit of only an amount which is attributable to the taxable services provided by him and not availing the CENVAT credit of the input services which are attributable to the trading activity. By availing only the CENVAT credit of the service tax paid attributable to the taxable services, in my view, appellant had complied with the provisions of Rule 6(2). I do find that the judgment of the Tribunal in the case of Trans Asian Shipping Services Pvt. Ltd. (supra) is directly on the point and in para No. 6.1 it is held as under. 6.1 As submitted by the learned counsel for the appellants, we find that the appellants have issued
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big entity spread over different countries and different places in India as there is no prescribed manner for maintenance of records under CENVAT Credit Rules, the records maintained by the appellants have to be accepted as records for the purpose of observing the conditions of CENVAT Credit Rules. Moreover, we find that the Chartered Accountant has given a categorical certificate that the appellants are maintaining separate records and have been making reversals of the balance amounts at the end of every month. In the case of Sify Technologies Limited, the issue is more specific and in para No. 8, 9 & 10, the Bench held as under: 8. Factually, the appellant has made its case very clear that it had received input services for its departments tabulated in Table-C. The input tax suffered on such services were allocated substantially to the departments in Table-A which provided taxable service and a minor part thereof to the department in Table-B. To this extent, the facts remained u
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ity of the credits allocated, due to its division of the department and maintenance of records, there cannot be any presumption by Revenue that the appellant's case falls under Rule 6 (3) of CCR 2004. It is also apparent from record that the order passed by the Authority below is unreasonable for the reason that as against credit of ₹ 6,66,423/- allocated to the department in Table- B which provided exempted service, disallowance of entire credit of Rs.1,11,07,075/- allocated to Departments in Table-A providing taxable service is contrary to the principal of proportionality. Therefore, entire disallowance does not call for any decision in favour of Revenue. 10. As an abundant caution, to make sure that the mathematical exercise is properly made by the appellant for allocation of credit rationally, the matter is remitted to the Adjudicating Authority to a limited extent to examine the allocation of the credit received by the appellant through departments in Table-C and allocab
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