2008 (8) TMI 874 - AT - Service Tax

Summary

Issues:
1. Quantification of reversal of Cenvat credit by the appellant.
2. Reversal of credit on nitrogen used in the manufacture of final product.
3. Reversal of credit on clearance of sulphur.
4. Reversal of input stage credit on fuel used in the manufacture of electricity for an exempted final product.

Issue 1: Quantification of reversal of Cenvat credit by the appellant
The appellant, engaged in the manufacture of petroleum products, availed Cenvat credit of service tax on input services. Following changes in duty exemptions, they informed the Department of not availing input service tax credit. Subsequently, they started availing credit after changes in rules. Discrepancies in the quantification of the credit reversal were identified, including errors in calculations and adoption of average amounts. The matter was remanded to the Commissioner for reevaluation based on actual data provided by the appellant.

Issue 2: Reversal of credit on nitrogen used in the manufacture of final product
The Revenue challenged the reversal of credit on nitrogen used in the production of the final product, arguing for additional reversal at the nitrogen stage. The Tribunal found that since the final product was exempted and credit was already reversed at that stage, no further reversal was necessary for nitrogen used in the manufacturing process. The contention of the Revenue was dismissed.

Issue 3: Reversal of credit on clearance of sulphur
The Revenue contested the Commissioner's decision not to require a reversal of credit on the clearance of sulphur, claiming it as a by-product. The Tribunal upheld the classification of sulphur as a by-product and determined that the clearance of exempted by-products did not mandate credit reversal. The matter was remanded to the original adjudicating authority in light of pending decisions for further clarification.

Issue 4: Reversal of input stage credit on fuel used in the manufacture of electricity for an exempted final product
The Revenue sought the reversal of input stage credit on fuel used to generate electricity for an exempted final product. The Tribunal noted that the duty on the fuel used for electricity generation was already paid, and the credit availed on inputs for fuel production was utilized. Therefore, no additional reversal of credit was required at the stage of utilizing electricity for the exempted final product. The Revenue's appeal on this ground was rejected.

In conclusion, all the appeals were disposed of based on the above analysis and decisions on each issue.