2015 (10) TMI 1983 - AT - Central Excise

Area based exemption - refund of duty paid in cash - revenue contended that cenvat credit availed on GTA service was not available and therefore to be reduced from refund claim - Benefit of Notification No. 39/2001-CE dated 31.07.2001 - Held that - Benefit of exemption notification would be extended on the condition that manufacturer first utilise the whole of credit available to them and pays only balance amount by cash, which is refundable. In the instant case, according to the adjudicating authority, the Respondent is not eligible to utilise the CENVAT credit for payment of GTA services for outward transportation services. We find, this issue is no more res-integra in view of the decision of the Hon ble Gujarat High Court in the case of CCE & Cus. vs. Parle Products Pvt. Limited 2010 (6) TMI 228 - Gujarat HIGH COURT . The other issue is that the adjudicating authority disallowed CENVAT credit utilised for outward transportation. No proceeding was initiated against the denied cenvat credit and Commissioner (Appeals) observed that the exemption notification would apply only in respect of utilisation of the CENVAT credit. It is further observed that if at all, there is a case of wrong utilisation of CENVAT credit, right course of action would have been initiation of proceedings under the provisions of Central Excise Act, 1944 read with Cenvat Credit Rules, 2004. There is no dispute that, no proceeding was initiated for deduction of CENVAT credit, therefore, benefit of the exemption notification can not be denied. - No reason to interfere the order of the Commissioner (Appeals). - Decided in favour of assessee.

Summary

Issues:
- Appeal against the order of the Commissioner (Appeals) regarding deduction of claim from the PLA amount.
- Admissibility of CENVAT credit for payment of service tax on Goods Transport Agency services.
- Interpretation of Notification No. 39/2001-CE regarding utilization of CENVAT credit.
- Disallowance of CENVAT credit utilized for outward transportation.
- Correctness of lower authority's decision to restrict claims based on irregular availment/utilization of CENVAT credit.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner (Appeals) where the deduction of claim from the PLA amount was set aside. The Respondent, engaged in manufacturing steel pipes, availed benefits under a specific notification. The issue revolved around the utilization of CENVAT credit for service tax on Goods Transport Agency services. The Revenue contended that the Respondent erroneously used the credit for non-admissible purposes, leading to deductions from refund claims.

2. The key contention was on the interpretation of Notification No. 39/2001-CE, specifically Clause 1A, which required the manufacturer to utilize the entire CENVAT credit for payment of duty on goods cleared. The Revenue argued that the Respondent misused the credit for output services, which was not permissible. However, the Commissioner (Appeals) allowed the appeal, emphasizing that the exemption notification applied only to the utilization of CENVAT credit for duty payment on final products.

3. The issue of disallowance of CENVAT credit for outward transportation services was raised. The adjudicating authority had not initiated proceedings against the denied credit, and the Commissioner (Appeals) noted that any wrong utilization of credit should be addressed through the appropriate procedures under the Central Excise Act and CENVAT Credit Rules. Since no proceedings were initiated for deduction of CENVAT credit, the benefit of the exemption notification could not be denied.

4. The judgment referred to a decision by the Hon'ble Gujarat High Court in a similar case, emphasizing that as long as Central Excise Duty was paid without default, any diversion of funds towards service tax did not breach the conditions of the Notification. The High Court highlighted that no prejudice to revenue occurred, as a substantial amount remained in the CENVAT credit account.

5. Ultimately, the Tribunal found no reason to interfere with the Commissioner (Appeals)'s order and rejected the Revenue's appeal. The decision was based on the proper interpretation of the Notification, the lack of initiation of proceedings for credit deduction, and the absence of revenue prejudice due to the payment of Central Excise Duty.