2015 (8) TMI 1405 - AT - Central Excise

CENVAT credit - reverse charge mechanism - Consulting Engineer Service - scope of SCN - Held that - there is no allegation in the SCN regarding the nexus between the disputed service and the goods manufactured by the appellant. Hence in absence of any specific allegation made therein the Commissioner (Appeals) is forbidden under law to decide such issue. Thus he has travelled beyond the scope of show cause notice and as such this ground taken for denial of Cenvat benefit is not in conformity with the cannons of justice - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Eligibility of Cenvat credit on service tax paid by the service receiver under Section 66A of Finance Act, 1994.
2. Nexus between the disputed service and the final product manufactured by the appellant.

Analysis:
1. The appellant, engaged in manufacturing aluminum casting, paid service tax on Consulting Engineer Service received from abroad as the recipient and availed Cenvat credit. The Central Excise Department disputed the Cenvat credit. The adjudication order dropped the proposals made against the appellant. The Revenue appealed to the Commissioner (Appeals), who ruled in favor of the Revenue. The appellant contended that the service tax paid by the service receiver is eligible for Cenvat benefit under Rule 3 of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) was criticized for addressing a nexus issue not raised in the show cause notice, which was deemed beyond the notice's scope.

2. The Tribunal noted that the appellant paid service tax as the receiver under Rule 2(1)(d)(iv) read with Section 66A. Although Cenvat credit was denied due to Section 66A not being in force at the time, Rule 3 of the Cenvat Rules was amended to allow such credit from a later date. The Tribunal found the appellant eligible for Cenvat credit as it had received the disputed service. Moreover, as the show cause notice did not mention any nexus between the service and the manufactured goods, the Commissioner (Appeals) was deemed to have overstepped by addressing this issue. Consequently, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.