2014 (4) TMI 1068 - AT - Service Tax

Waiver of pre deposit - Utilization of CENVAT Credit - input services utilised for manufacture of mobile handsets - Held that - Lexicographic meaning that indicate that both Duty and tax fall within the generic ambit of taxes would not aid in the interpretation of the provisions of Rule 3(4) of the Cenvat Credit Rules 2004. We notice that the several taxes and duties enumerated in Rule 3(1) are the duties/taxes of which credit could be availed by an assessee for remittance of Central Excise duty or Service Tax as the case may be for manufacture of goods or for rendition of taxable services. The provisions of Rule 3(4) appear to indicate a distinction between duties of excise and tax on services. This is so in view of the relevant provisions emplying both the words duty and tax distinctly. - what is prohibited for remittance of NCCD is credit of any duty specified in sub-rule (1) except NCCD and that would mean duties of excise but not service tax leviable and exigible under the provisions of the Finance Act 1994. On this analyses the impugned order is prima facie unsustainable. We therefore grant waiver of pre-deposit in full and stay all further proceedings for realisation of the assessed liability pending disposal of the appeal - Stay granted.

Summary

Issues:
Interpretation of Rule 3(4) of the Cenvat Credit Rules, 2004 regarding the utilization of credit for remittance of National Calamity Contingent Duty (NCCD).

Analysis:
The appellant, a manufacturer of goods falling under a specific Tariff Item, utilized credit of Service Tax remitted on input services for remittance of NCCD, leading to the initiation of recovery proceedings. The dispute arose from the interpretation of the fourth proviso to Rule 3(4) of the Rules, which prohibits the utilization of certain credits for payment of NCCD on specific goods. The impugned order confirmed the levy and recovery of NCCD based on this interpretation.

The appellant argued that the term "duty" in the Rules refers to Central Excise duty, not Service Tax, based on distinct usage of "duty" and "tax" in the provisions. Citing legal precedents and principles of statutory interpretation, the appellant contended that different words used in a statute signal distinct legislative intent, supporting the interpretation that the prohibition applies to Central Excise duty, not Service Tax credits.

The respondent, however, relied on a full Bench decision of the Delhi High Court, emphasizing that taxes, including duties like NCCD, fall within the generic ambit of taxes imposed for public purposes. The Tribunal analyzed the provisions of Rule 3(4) and noted the distinction made between duties of excise and tax on services, indicating that the prohibition on utilizing credits for NCCD applies to duties of excise, not Service Tax.

After a detailed analysis, the Tribunal concluded that the prohibition under Rule 3(4) pertains to duties of excise, not Service Tax, making the impugned order unsustainable. Consequently, the Tribunal granted a waiver of pre-deposit and stayed further proceedings for the recovery of the assessed liability pending the disposal of the appeal, thereby ruling in favor of the appellant on the interpretation of the relevant rule.