2017 (12) TMI 157 - AT - Central Excise

CENVAT credit - fruit pulp - Whether manufacturer of goods having Nil tariff rate of duty is eligible for Cenvat Credit at all? - Held that - the Cenvat Credit cannot be denied as the final product fruit pulp is chargeable to Nil rate of duty as per tariff, exported by the appellants - the Hon ble High Court of Bombay in the case of Sharp Menthol India Ltd. 2011 (4) TMI 27 - BOMBAY HIGH COURT has held that The assessee was entitled to avail the Cenvat credit of duty paid on menthol used in the manufacture of exempted menthol crystals and utilize the said credit for payment of duty on clearance of peppermint oil either for home consumption or for export - credit allowed. Refund claim - man power recruitment service - security service - refund claims were rejected by the original adjudicating authority relying on Rule 5B of the Cenvat Credit Rules, 2004 read with N/N. 12/2004-CE (NT) dated 03/03/2014 - whether the appellants are providers of service or not in terms of Rule 5B of the Cenvat Credit Rules? - Held that - It is clear from the notification and Rule 5B that the said rule and notification are intended solely for the service provider providing specific services - The appellant s claim is that by virtue of Section 68 (2), since liability to pay partial service tax has been imposed on them they become service provider is misplaced - The Act differentiates between the service provider and person liable to pay service tax under different circumstances - Section 68 (2) is a special mechanism for shifting part liability to pay service tax from service provider to service recipient but it does not convert in the service recipient into service provider - Rule 5B has no application in the appellant s case. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Entitlement to refund claim for non-excisable commodity export services under Cenvat Credit Rules.
2. Determination of service provider status under reverse charge mechanism and eligibility for Cenvat Credit.

Issue 1 - Refund Claim Entitlement:
The appellant, engaged in exporting non-excisable commodity "fruits pulp," filed refund claims for man power recruitment service and security service. The original adjudicating authority rejected the claims citing Rule 5B of the Cenvat Credit Rules, 2004 and Notification No.12/2004-CE (NT). The authority concluded that the appellants, registered for various taxable services, were service receivers under reverse charge mechanism and not entitled to refund or Cenvat Credit due to the non-excisable nature of their final products.

Issue 2 - Service Provider Status and Cenvat Credit Eligibility:
The Commissioner (Appeals) analyzed whether the appellants, paying service tax under reverse charge mechanism, could be considered output service providers and eligible for Cenvat Credit. The appellants argued their liability under Section 68(2) of the Finance Act, 1994 made them service providers. However, the Commissioner held that Rule 5B was intended for specific service providers, not service receivers. The Commissioner emphasized that Section 68(2) did not convert a service recipient into a service provider, and Rule 5B did not apply to the appellants' case. The judgment referenced precedents like the Sharp Menthol India Ltd. case to support the denial of Cenvat Credit denial due to the non-excisable nature of the final product "fruit pulp."

In conclusion, the impugned orders were upheld, and the appeals were dismissed, as pronounced on 29/11/17.