2017 (8) TMI 786 - AT - Central Excise

CENVAT credit - packing material - The main allegation in the show cause notice is that the credit is not eligible as it was availed by the assessee under the erstwhile Rule 6 of Service Tax Credit Rules 2002 and also for the reason that the advertisement and insurance services have no nexus with the output service of clearing and forwarding agent service - Held that - In a catena of decisions it has been held that when input services are related to the business activities of the assessee are eligible input services - The second allegation that the assessee is not eligible for availing credit is that since the same was availed under the erstwhile Rule 6 of Service Tax Credit Rules 2002. This is without any basis. Rule 11 of CENVAT Credit Rules 2004 provides for the transitory provision to avail and utilize the credit which was accumulated prior to coming into existence of the new legislation of CENVAT Credit Rules 2004. On such score we find that disallowance of 39, 09, 292/- for this reason also is unjustified - The impugned order dropping the demand of 39, 09, 292/- is upheld and the order passed by the Commissioner disallowing the credit of 49, 00, 192/- is modified to the extent of allowing the credit of 39, 09, 242/- and disallowing the balance. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
- Availment of credit on packing materials for duty paid and exempted refined oil
- Availment of credit on common inputs and input services for manufacturing exempted refined oil
- Availment of credit on service tax for dutiable products
- Ineligible credit on input furnace oil
- Disallowance of credit on input services like advertisement and insurance services for output services
- Interpretation of CENVAT Credit Rules, 2004

Analysis:

Availment of Credit on Packing Materials:
The appellant, engaged in manufacturing refined sunflower oil, faced allegations regarding the use of credit on packing materials for both duty paid and exempted refined oil without maintaining separate accounts. The department proposed a significant demand, but the Commissioner dropped the demand, concluding no penalty imposition.

Availment of Credit on Common Inputs and Input Services:
Another issue arose when the appellant used credit on common inputs and input services for manufacturing exempted refined oil without maintaining separate accounts. The department proposed a demand, but the Commissioner dropped it for the specified period.

Availment of Credit on Service Tax and Ineligible Credit on Input Furnace Oil:
The appellant availed credit on service tax for dutiable products and took ineligible credit on input furnace oil based on improper documents. The Commissioner dropped the demand for both these issues.

Disallowance of Credit on Input Services:
A show cause notice alleged wrongful availment of credit on input services like advertisement and insurance services for output services. The Commissioner disallowed the credit for these services, ordering recovery of a specific amount along with interest, without imposing a penalty.

Interpretation of CENVAT Credit Rules, 2004:
The main focus was on the interpretation of CENVAT Credit Rules, 2004, particularly regarding the availment of credit under the erstwhile Rule 6 of Service Tax Credit Rules, 2002. The appellant argued for the eligibility of credit under the transitory provision of Rule 11 of CENVAT Credit Rules, 2004. The Commissioner upheld the dropping of one demand and modified the disallowance of another demand, allowing a partial credit.

In conclusion, the appellate tribunal partly allowed the appeal filed by the assessee and dismissed the appeal filed by the department, emphasizing the eligibility of credit under specific rules and provisions while addressing each issue raised in the case.