2016 (10) TMI 874 - AT - Service Tax

100% EOU - manufacturer of wire connector - service provider under the category of Renting of Immovable Property - whether utilisation of the Cenvat credit in their 100% EOU for payment of service tax under renting service allowed? - Rule 3(1) of the CCR - decision in the case of CCE,Coimbatore Vs. Luxmi Technology & Engineering Indus. Ltd. 2011 (2) TMI 1275 - CESTAT, CHENNAI relied upon - Held that - there is no such restriction for utilisation of the Cenvat credit by a manufacturer, being 100% EOU under the Cenvat Credit Rules. Further, I find that the facts of this case are squarely covered by the earlier ruling of this Tribunal in the case of CCE,Coimbatore Vs. Luxmi Technology & Engineering Indus. Ltd. in favour of the appellant, where it was held that Rule 3(1) of the CENVAT Credit Rules - a provider of taxable service is also entitled to take credit of specified excise duty, additional duty of customs and service tax in respect of input services and utilize the credit from all these sources for the purpose of paying service tax. Extended period of limitation is not attracted in view of the earlier Audit Report for December to January, 2009-2010 and also under the fact that the whole exercise is revenue neutral. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Utilization of Cenvat credit for payment of service tax under the category of "Renting of Immovable Property"
- Applicability of Rule 3(1) and Rule 3(4) of the Cenvat Credit Rules
- Imposition of penalty under section 78 of the Act
- Rejection of appeal by the Commissioner (Appeals)
- Consideration of extended period of limitation

Analysis:

Utilization of Cenvat credit for payment of service tax under the category of "Renting of Immovable Property":
The appellant, engaged in manufacturing as a 100% EOU and also providing renting services, utilized Cenvat credit for service tax payment. The issue arose when a show cause notice was issued questioning this utilization. The appellant contended that there is no restriction on using credit under Cenvat Credit Rules and cited a precedent supporting their position. The Tribunal found no restriction for a manufacturer like the appellant to use Cenvat credit, especially when registered as a service provider. The Tribunal relied on a previous ruling in favor of the appellant, allowing the appeal and granting consequential benefits.

Applicability of Rule 3(1) and Rule 3(4) of the Cenvat Credit Rules:
The appellant argued that they correctly availed credit under Rule 3(1) and utilized it for service tax payment under Rule 3(4) of the Cenvat Credit Rules. They emphasized that the Rules permit using credit from a common pool for various purposes without the need for separate accounts. The Tribunal agreed with this interpretation, supporting the appellant's position and allowing the appeal based on the Rules' provisions.

Imposition of penalty under section 78 of the Act:
The appellant faced a penalty under section 78 of the Act in the original order. However, the Tribunal set aside this penalty, considering the appellant's compliance with the Cenvat Credit Rules and the absence of malafide intentions or suppression. The Tribunal's decision to allow the appeal implicitly nullified the penalty imposed under section 78.

Rejection of appeal by the Commissioner (Appeals):
The Commissioner (Appeals) rejected the appellant's appeal, leading them to approach the Tribunal. The Tribunal, after thorough consideration of the arguments presented, found in favor of the appellant based on the interpretation of the Cenvat Credit Rules and relevant precedents. The Tribunal's decision overruled the rejection by the Commissioner (Appeals) and allowed the appeal.

Consideration of extended period of limitation:
The issue of the extended period of limitation was raised during the proceedings. The appellant argued that the extended period was not applicable, pointing to an earlier Audit Report and the revenue-neutral nature of the situation. The Tribunal concurred with this argument, further supporting the appellant's case and allowing the appeal while also acknowledging the revenue-neutral aspect and the absence of malafide intent.