2017 (7) TMI 410 - AT - Service Tax

CENVAT credit - renting of immovable property service - denial of credit on the ground that the credit availed of duty paid on input/tax paid on input services was in relation to the manufacturing activities and not to the renting of the said property - Held that - in near similar circumstances, the Tribunal in Commissioner of Central Excise, Coimbatore v. Lakshmi Technology & Engineering Indus. Ltd 2011 (2) TMI 1275 - CESTAT, CHENNAI has held that the rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purposes and there is no restriction placed to the effect that credit accounts should be maintained for use for manufacture of excisable goods and for use for providing services - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of CENVAT credit utilized for renting of immovable property service.
- Interpretation of CENVAT Credit Rules, 2004 regarding credit utilization.
- Validity of utilizing credit for different purposes under a common pool.
- Applicability of circular on mismatch of credit claims by the same assessee.
- Comparison with previous tribunal decisions on credit utilization.

Analysis:
1. The main issue in this case was the disallowance of CENVAT credit utilized by M/s PMT Machines Ltd for renting out a portion of their premises. The Commissioner confirmed the recovery of the credit utilized and imposed penalties under the Finance Act, 1994. The appellant contended that there were no restrictions in the CENVAT Credit Rules, 2004 on such utilization and that the credit availed could have been used for goods clearance, making it revenue neutral.

2. The Tribunal referred to a previous decision in SS Engineers v. Commissioner of Central Excise, Pune-I, which allowed credit taken on input services for output services to be utilized for duty liability on manufactured goods. The Tribunal emphasized that the rules did not require separate accounts for manufacturers and service providers, allowing cross-utilization of credit. The High Court of Bombay upheld the Tribunal's decision, stating that cross-utilization of credit on goods and services without restrictive provisions was permissible.

3. The High Court also highlighted a circular from the Central Board of Excise & Customs, emphasizing the availability of CENVAT credit in a common pool for payment of excise duty and service tax. The court differentiated this case from previous decisions related to service tax on erection and commissioning services, stating that the circular did not apply to the present dispute regarding manufacturing inputs for tax liability discharge.

4. Another tribunal decision in Commissioner of Central Excise, Coimbatore v. Lakshmi Technology & Engineering Indus. Ltd was cited, which allowed a manufacturer and service provider to use credit from a common pool for different purposes without the need for separate accounts. The tribunal held that the rules permitted the use of credit for various duties and services without restrictions based on the type of output.

5. Ultimately, following the previous decisions and interpretations, the appeal of M/s PMT Machines Ltd was allowed, and the impugned order disallowing the credit utilization was set aside, emphasizing the validity of utilizing credit from a common pool for different purposes without the need for separate accounts.

This detailed analysis of the judgment showcases the interpretation of the CENVAT Credit Rules, 2004, the validity of cross-utilization of credit, and the application of previous tribunal decisions and circulars in determining the legality of utilizing credit for different purposes under a common pool.