2013 (10) TMI 611 - AT - Central Excise

Utilization of CENVAT Credit - Whether the CENVAT credit of input services required for providing output service could be utilized for payment of excised duty on the goods manufactured by the appellant Held that - Rule 3 of the CENVAT Credit Rules, 2004 does not stipulate maintaining separate account as a manufacturer and as a service provider - Third proviso to sub-rule (4) of Rule 3, provides that no credit of the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, shall be utilized for payment of service tax on any output service, Similar restrictions are in other proviso - there are certain restrictions on the utilization of particular type of duties which are elaborated in sub-rule (b) of Rule 7 of the CENVAT Credit Rules - These restrictions do not cover cross utilization of credit of excise and service tax, as a general proposition. Sr. no. 8 and the Table details the CENVAT credit taken and utilized - In ER-1 return, in Table at Sr. no. 8, in column (9), details about service tax are specifically listed - On careful analysis of the said format, the intention appears to be to permit cross utilization of the credit of excise duty and service tax Decided in favour of Assessee. Following CCE, Coimbatore vs. Lakshmi Technology and Engg. Industries Ltd. 2011 (2) TMI 1275 - CESTAT, CHENNAI decided in favor of assessee.

Summary

Issues:
1. Whether CENVAT credit of input services for output service can be used for excise duty payment.

Analysis:
The case involves a dispute regarding the utilization of CENVAT credit by the appellant, engaged in manufacturing sugar machinery and providing erection and commissioning services. The issue revolves around whether the credit of service tax on services related to erection and commissioning can be used for paying excise duty on manufactured goods. The appellant argued that there is no restriction on cross-utilization under the CENVAT Credit Rules, citing various Tribunal judgments in support.

The Additional Commissioner contended that maintaining segregated accounts for input and input services for manufactured goods and output services is necessary due to different tax collection laws. He argued that separate registration and authorities for manufacturing and service provision require distinct assessments. The AR emphasized administrative and legal reasons for separate accounts, citing Rule 6(2) of CENVAT Credit Rules and the need for clarity in audits and assessments.

Upon review, the Tribunal examined the CENVAT Credit Rules, noting that Rule 3 allows credit for duties including excise and service tax without mandating separate accounts for manufacturers and service providers. Provisions under Rule 7(b) also do not restrict cross-utilization of excise and service tax credits. The Tribunal referenced a case law highlighting the common pool concept for credit utilization by manufacturers and service providers, emphasizing the absence of a requirement for separate accounts. The Tribunal also analyzed the ER-1 and ST-3 return formats, indicating a provision for cross-utilization of excise duty and service tax credits.

Ultimately, the Tribunal allowed the appeal, concluding that the CENVAT credit of input services for output services can be used for excise duty payment. The decision was based on the interpretation of relevant rules, case law, and return formats supporting the cross-utilization of credits.