2011 (2) TMI 306 - AT - Service Tax

Cenvat credit - Since the applicants are having a common account and they have utilized the entire credit against the output services and have not utilised the credit for clearing manufactured products - As per provisions of Cenvat Credit Rules no where it is specified that if an assessee is engaged in both activities i.e. manufacturing and providing services the assessee has to maintain separate cenvat credit account of input/output service - Prima facie the availing of credit or its utilization cannot be denied - Decided in favour of assessee.

Summary

Issues:
1. Demand of cenvat credit along with interest and penalty from the applicants.
2. Requirement of maintaining separate cenvat credit accounts for manufacturing activity and output services.
3. Validity of utilizing credit against payment of tax on output services without using it for manufactured products.
4. Grant of waiver of pre-deposit of entire demand during the pendency of the appeal.

Analysis:
1. The judgment dealt with the demand of cenvat credit, interest, and penalty from the applicants, who were manufacturers and service providers. The applicants maintained a common cenvat credit account for both inputs and input services. The department contended that the applicants were not entitled to claim the entire credit for payment of duty on output services due to not maintaining separate accounts. A show cause notice was issued, leading to the appeal.

2. The advocate for the applicants argued that the Cenvat Credit Rules do not mandate separate cenvat credit accounts for manufacturing and output services. Since the applicants utilized the credit against tax on output services and not on manufactured products, the impugned order was challenged as unsustainable. The advocate sought a waiver of pre-deposit during the appeal.

3. The Departmental Representative (DR) claimed there was no evidence of separate accounts being maintained by the assessee for cenvat credit related to manufacturing and output services. However, the tribunal observed that the applicants had a common account and had utilized the entire credit for output services, not for manufactured products. The tribunal noted that the Cenvat Credit Rules did not specify the necessity of separate accounts in cases where an assessee is engaged in both manufacturing and service provision.

4. After considering the submissions, the tribunal found in favor of the applicants. It held that the utilization of credit could not be denied based on the activities of manufacturing and providing services. Consequently, the tribunal granted a waiver of the entire demand of cenvat credit, interest, and penalty, and stayed the demand during the appeal process. The judgment was dictated and pronounced in open court.