2018 (2) TMI 393 - AT - Central Excise

CENVAT credit - final product chargeable to NIL rate of duty - Held that - the issue regarding availability of credit has been dealt by the Hon ble High Court of Bombay in the case of Sharp Menthol India Ltd. 2011 (4) TMI 27 - BOMBAY HIGH COURT , where it was 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. Refund claim - input services - man power recruitment service and security service - Rule 5B of the CCR, 2004 read with N/N. 12/2004-CE (NT) dated 03/03/2014 - Held that - It is possible that the person liable to pay service tax may not be the service provider. If the Government intended to provide this facility to service recipient paying service tax on reverse charge basis the Government would have used the word person liable to pay service tax and not the word service provider. 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 appellants case. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Refund claim rejection based on Cenvat Credit Rules and Notification
2. Dispute regarding service tax payment under reverse charge mechanism
3. Eligibility for Cenvat Credit on non-excisable goods
4. Determination of service provider status under Cenvat Credit Rules

Analysis:
1. The appellant, engaged in exporting fruits pulp, filed a refund claim for man power recruitment and security services but was rejected citing Cenvat Credit Rules and Notification No.12/2004-CE (NT). The original authority held the appellant not entitled to refund as they were service receivers under reverse charge mechanism for various services.

2. The Commissioner (Appeals) raised questions on whether a recipient under reverse charge mechanism can be considered an output service provider and if a manufacturer of goods with nil tariff rate can claim Cenvat Credit. The Commissioner held the appellant not entitled to refund or Cenvat Credit due to non-excisable final products.

3. The appellant argued citing legal precedents that service tax paid on non-excisable goods for export should not be denied. They contended that liability under reverse charge mechanism makes them service providers, as per Section 68(2) of the Finance Act, 1994. The appellant relied on judgments supporting their claim for Cenvat Credit.

4. The issue of whether the appellant qualifies as a service provider under Rule 5B of Cenvat Credit Rules was analyzed. The Commissioner (Appeals) dismissed the appellant's argument, stating that Rule 5B is for specific service providers, not recipients under reverse charge mechanism. Section 68(2) does not convert a service recipient into a service provider, and Rule 5B does not apply in the appellant's case.

Overall, the impugned orders were upheld, and the appeals were dismissed based on the analysis of the issues presented in the case.