2015 (1) TMI 446 - AT - Central Excise

CENVAT Credit - Utilisation of Cenvat Credit post SSI Exemption as availed during SSI exempiton - Cenvat Credit on Capital goods and input services - Whether appellants can utilize the said service tax credit availed much prior to February, 2010 for payment of excise duty after the said date. - Held that - Service tax credit availed by the appellants at the time when they were falling within SSI exemption limit and were not paying any excise duty, is not available to them for payment of excise duty. The said service tax credit was availed as an input credit for the services being provided by them and as such was available for utilization towards service tax payable on the output services. Credit on capital goods - Held that - part of the credit also belonged to the credit of duty paid on the capital goods. The credit on capital goods is not to be allowed only when such capital goods are used exclusively in the manufacture of the exempted final product. In the present case, the appellant s final product was not unconditionally exempted. Such exemption was based upon the value of clearances. As such, the capital goods which would be used for manufacture of the final product, all exhausting of the exemption limit, would become entitled to the credit in terms of the provision of Cenvat credit Rules. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Utilization of service tax credit for payment of excise duty post-exemption limit.

Analysis:
The case involved a dispute regarding the utilization of service tax credit availed by the appellants before crossing the exemption limit for payment of excise duty on their final product after the exemption limit was exceeded. The appellants had transferred the balance of service tax credit to their excise credit account to offset excise duty payments. The key question was whether the service tax credit, initially availed when the appellants were under the SSI exemption limit, could be used for excise duty payments post-exemption limit.

The presiding judge, Ms. Archana Wadhwa, held that the service tax credit availed during the SSI exemption period, when no excise duty was being paid, could not be utilized for payment of excise duty once the exemption limit was exceeded. The judge emphasized that the service tax credit was meant for offsetting service tax on output services and not for excise duty on final products. The transfer of credit to the excise account was deemed invalid due to the lack of nexus between the services provided earlier and the goods manufactured post-exemption limit.

The judge referred to the impugned order, highlighting that the Cenvat credit carried forward by the appellants did not have a direct or indirect connection with the final products manufactured post-exemption. The judge emphasized the necessity of establishing a nexus between input services and the goods being produced, which was absent in the case. The judge also noted that the capital goods credit could only be allowed if the goods were used exclusively in manufacturing the exempted final product, which was not the case here.

In conclusion, the judge set aside the impugned order and remanded the matter to the adjudicating authority for a fresh decision. The judge directed the authority to consider the appellant's plea of limitation and the argument that the issue was a bona fide interpretation of the law, warranting no penalty imposition. The appeal was allowed by way of remand, providing an opportunity for a fresh review based on the observations made in the judgment.