2017 (4) TMI 588 - AT - Service Tax

Reversal of CENVAT credit - Rule 6(3)(c) of CCR - As per Rule 6(3)(c) the appellant is entitled to utilize Cenvat credit only to the extent of 20% whereas they have utilized Cenvat credit in excess to 20% , the said excess utilized Cenvat credit was demanded - Held that - there is no bar in availment of the credit. Even if the appellant utilize excess credit in a particular month/period there will be a short utilization in the subsequent month this will amount to deferment of payment from cash from particular month to the subsequent month, this factual aspect was not looked into by the adjudicating authority - matter remanded to the adjudicating authority for passing a fresh de novo adjudication order - appeal allowed by way of remand.

Summary

Issues:
1. Availment of Cenvat credit on input services used in providing taxable and exempted services.
2. Availment of Cenvat credit on input services used in exempted and taxable services without maintaining separate accounts.
3. Eligibility of certain services for Cenvat credit.
4. Defense on limitation regarding the availment of Cenvat credit.
5. Excess utilization of Cenvat credit over 20%.
6. Demand confirmed on availing Cenvat credit for input services used in exempted goods.
7. Applicability of Rule 6(3) regarding proportionate foregone Cenvat credit.
8. Invocation of extended period for demand.

Analysis:
The appellant, engaged in various services, availed Cenvat credit on input services used for both taxable and exempted services. The adjudicating authority confirmed demands due to excess utilization of credit over 20% and failure to maintain separate accounts for input services used in exempted and taxable services. The appellant challenged the order, arguing that excess utilization only leads to interest liability, not duty demand, and that proportionate foregone credit should be considered. The appellant also raised a defense on limitation, contending that the department was aware of all details. The Revenue supported the findings of the impugned order.

The Tribunal noted that Rule 6(3)(c) restricts utilization of credit to 20% of tax liability in a month but allows availment without limitation. Excess utilization leads to deferment of payment to subsequent months, incurring interest. The Tribunal found the adjudicating authority failed to consider this aspect and remanded the matter for fresh adjudication, emphasizing the need to verify excess utilization impacts on subsequent months.

Regarding the demand based on availing credit for input services used in exempted goods, the Tribunal held that the adjudicating authority did not address the appellant's argument of proportionate foregone credit. The Tribunal disagreed with the sole ground of non-maintenance of separate accounts, stating that quantifying foregone credit suffices as maintaining a separate account for intangible input services. The Tribunal directed a reevaluation of the case, including the issue of limitation, and set aside the impugned order for a fresh adjudication by the original authority, ensuring the appellant's right to a fair hearing.