2013 (9) TMI 292 - AT - Service Tax

Wrong Utilization of CENVAT Credit - Lapsed Credit - The department was of the view that the appellant could not have utilised the Cenvat Credit as the credit which accumulated prior to 01/06/2007 lapsed and therefore utilisation of lapsed credit was wrong under Rule 14 of the Cenvat Credit Rules 2004 read with Section 73 of the Finance Act 1994 - Held that - There was no specific exclusion of any inputs/input services under Rule 6(3) or under Rule (3) of the Cenvat Credit Rules - There was no provision of law to come to such a conclusion - The CBE and C s Circular also confirmed that the accumulated credit would not lapse and Rule 6 (3) does not bar utilisation of accumulated credit and therefore the department should not deny utilisation of the accumulated credit by the assessee after 01/04/2008 Waiver of Pre-Deposit - The appellant had made out a strong prima facie case for grant of stay - unconditional waiver from pre-deposit of dues was allowed and stay granted during the pendency of the appeal Decided in favour of Assesse.

Summary

Issues:
- Utilization of accumulated Cenvat Credit prior to 01/06/2007.
- Interpretation of Cenvat Credit Rules, 2004.
- Lapsing of accumulated credit.
- Applicability of circulars and judicial precedents.

Utilization of accumulated Cenvat Credit prior to 01/06/2007:
The appellant availed Cenvat Credit of service tax paid on input services accumulated before 01/06/2007 and used it towards service tax liability from 01/06/2007. The department contended that pre-01/06/2007 accumulated credit lapsed and its utilization was incorrect. A demand was raised against the appellant, leading to the appeal.

Interpretation of Cenvat Credit Rules, 2004:
The appellant argued that under Rule 6(3)(c) of the Cenvat Credit Rules, 2004, they could not utilize 80% of the input service tax credit before 01/06/2007 due to restrictions. They utilized the accumulated credit post 01/06/2007 towards service tax liability. The appellant highlighted the absence of a provision for lapsing of accumulated credit in the rules.

Lapsing of accumulated credit:
A circular clarified that accumulated credit does not lapse, and Rule 6(3) does not prohibit the utilization of accumulated credit after 01/04/2008. The tribunal found no legal basis for the adjudicating authority's decision that the accumulated credit lapsed on 01/06/2007. Precedents cited were deemed irrelevant to the case at hand.

Applicability of circulars and judicial precedents:
The tribunal rejected the adjudicating authority's reliance on judicial precedents like CCE vs. Ratan Melting and Wire Industries and CCE vs. Gujarat Narmada Fertilizers Co. Ltd. as they were not applicable to the current case. The tribunal emphasized that the circular confirmed the non-lapsing nature of accumulated credit and upheld the appellant's right to utilize the credit post 01/04/2008.

In conclusion, the tribunal granted a stay on recovery of dues, finding that the appellant had a strong prima facie case. The tribunal ruled in favor of the appellant, emphasizing the legality of utilizing accumulated Cenvat Credit and rejecting the lapsing of credit as claimed by the department.