2015 (12) TMI 324 - AT - Service Tax

Cenvat Credit - Demand of service tax at the rate of 5/8/10% of the value of the exempted final products, in terms of the provisions of Rule 6(3) of the Cenvat Credit Rules - simultaneous maintenance of separate accounts for inputs and a common cenvatable account for input services - Held that - Admittedly the provisions of Rule 6, nowhere lay down that such a simultaneous procedure followed by an assessee in respect of inputs and input services cannot be followed. In the absence of the same, to read so in the said Rule would amount to introducing a condition in the Rule, which is not permissible. As such we are of the view that if the appellant has maintained separate accounts for the inputs and has reversed the proportionate Cenvat credit in respect of input services, the provisions of Rule 6(3) do not get attracted. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Interpretation of Rule 6(3) of the Cenvat Credit Rules regarding the maintenance of separate accounts for inputs and input services.

Analysis:
The appellants, engaged in manufacturing dutiable and exempted final products, maintained separate accounts for inputs but reversed the proportionate credit taken on common input services related to exempted goods due to the impracticality of separate accounts for services. The authorities demanded a confirmation of the demand for exempted final products under Rule 6(3) of the Cenvat Credit Rules. The lower authorities confirmed the demands, arguing that Rule 6 does not allow simultaneous maintenance of separate accounts for inputs and a common cenvatable account for input services.

The appellant contended that Rule 6 does not prohibit their procedure, as they maintained separate accounts for inputs and reversed the proportionate credit for input services. The Tribunal agreed with the appellant, stating that Rule 6 does not restrict the simultaneous procedure followed by an assessee for inputs and input services. Imposing such a condition not specified in the Rule would be impermissible. Therefore, if separate accounts for inputs are maintained and proportionate credit for input services is reversed, Rule 6(3) does not apply.

The Tribunal acknowledged the doubt raised by the learned DR regarding the correctness of the reversal quantum, as the lower authorities did not verify it due to rejecting the appellant's legal contention. Consequently, the Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority to verify the appellant's claim of reversal of Cenvat credit for input services concerning the quantum of the reversal. All stay petitions and appeals were disposed of accordingly.