CENVAT - Appellant manufacturing goods as well as providing output service - Credit availed on Input services utilized for payment of CX duty - once credit is admissible it forms part of common pool and manufacturer can utilize Credit for both ST on output services or CX duty - recovery stayed: CESTAT
By TIOL News Service
MUMBAI, JAN 20, 2013: THE applicants are engaged in the manufacture of excisable goods as well as in providing taxable output services of ‘Erection and Commissioning'. The applicants availed CENVAT credit of service tax on services like labour, erection, installation etc. which are in relation to providing output services. This credit has been utilized for the payment of Central Excise duty at the time of clearance of manufactured excisable goods.
It is the contention of the Revenue that this cross utilization of CENVAT credit availed on Input services used for providing output services is not permissible.
Resultantly, a demand notice was issued demanding CENVAT credit of Rs. Rs.1,28,02,575/- and the same was confirmed by the CCE, Pune-I along with imposition of penalty and interest.
Before the CESTAT the applicant submitted that once they are held entitled for credit in respect of input services it forms part of a common pool and the same can be utilized for clearance of excisable goods or for providing taxable output services. They also relied on the stay order dt. 27.04.2012 in Appeal no. ST/737/2011 whereby the WZB, Ahmedabad waived the pre-deposit of dues which were confirmed on same ground after relying upon the circular issued by the DG Audit vide F.No. 381/23/2010/862 dated 30.03.2010. A similar view taken in another appeal i.e ST/738/2011 & Stay Order no. S/1943/WZB/AHD/2012 dt. 6.9.2012, wherein the CESTAT, WZB, Ahmedabad had waived the pre-deposit of dues was also referred to by the applicant to submit that the demand was not sustainable.
Revenue relied upon the provisions of CENVAT Credit Rules and submitted that credit of service tax availed in respect of the taxable service which are not used directly or indirectly and in or in relation to the manufacture of excisable goods cannot be utilized for payment of duty at the time of clearance of the goods. It is also submitted that applicants are having two separate agreements, one is for manufacture of goods and other is for erection and commissioning which is liable for payment of service tax under the Finance Act and in this view of the matter, the appellant had wrongly utilized the credit of input services which are not used in or in relation to the manufacture of goods for payment of excise duty on the excisable goods.
The Bench observed -
“4. We find that the WZB, Ahmedabad in the stay order relied upon by the applicant held as under:-
“The second stand taken by the Revenue is that appellant could not have utilized the cenvat credit available and taken for inputs in respect of manufacturer of texturised yarn for payment of service tax on business auxiliary service. For this, the ld. counsel relies upon the Circular issued by DG Audit vide F.No. 381/23/2010/862 dated 30.03.2010 wherein it has been clearly held that once the credit is admissible and taken it forms part of a common pool and a manufacturer who is paying excise duty on the goods manufactured and also is a service tax assessee liable to pay service tax, can utilize the credit available for payment of service tax or excise duty according to this convenience. On going through the impugned order, I find that the Circular issued by the DG Audit has not be been considered at all and has not been discussed also. Prima facie, I find that the circular is applicable to the facts of this case and therefore appellant can be said to have made out a prima facie case in their favour. Accordingly, the requirement of pre-deposit of amount demanded with interest and penalty is waived and stay against recovery of the same is allowed during the pendency of appeal.”
5. This view is followed by the Tribunal in the stay order dt. 6.9.2012 also. In view of this as on the same issue there is waiver of the dues granted by the Co-ordinate Bench of the Tribunal. The pre-deposit of dues are waived for hearing of the appeal and recovery of the same is stayed during the pendency of the appeal….”
Noting that the amount of duty involved is more than Rs.1 crore, the Registry was directed to list the appeal for hearing on 5.2.2013.
In passing - Unnamed appellants, Common pool & separately registered!
(See 2013-TIOL-122-CESTAT-MUM)
