2018 (6) TMI 1143 - AT - Central Excise

CENVAT credit - Banking and other Financial Services - Reverse Charge Mechanism - Revenue was of the view that the appellant was required to reverse 50% of the cenvat credit on input and input service taken, on monthly basis as stipulated under Rule 6(3B) of the Cenvat Credit Rules, 2004 - Held that - It is evident that company, which accepts deposits from public for the purpose of lending or investment, will be considered as banking company - In view of the Explanation to Section 5(c) of the Banking Regulation Act, 1949, the appellant will not fall within the category of Banking Company since they are primarily engaged in the manufacture of iron steel items. Also, Since the appellant s principal business is not receiving deposits and lending money in any manner, it cannot be said that they fall within the category of NBFC. The provisions of Rule 6(3B) will be applicable only to a banking company and financial institution including a non banking financial company. Since the appellant does not fall within any of the categories, the provisions of Rule 6(3B) will not be applicable to the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Rule 6(3B) of the Cenvat Credit Rules, 2004
- Applicability of the requirement of reversal of 50% credit availed
- Definition of 'Banking Company', 'Financial Institution', and 'Non Banking Financial Company'
- Whether the appellant falls within the categories specified in Rule 6(3B)
- Justification for setting aside the impugned order

Analysis:
The appeal was filed against an Order-in-Original passed by the Principal Commissioner, CGST, CE & Customs, Raipur. The appellant, engaged in manufacturing various goods, availed cenvat credit on inputs, capital goods, and input services. The dispute arose when the departmental officers observed that the appellant did not maintain separate records for input and input services used for taxable services falling under 'Banking and other Financial Services.' A show cause notice was issued, resulting in an order requiring the appellant to reverse a significant amount of cenvat credit along with interest and penalty. The appellant contested this order, arguing that the requirement to reverse 50% of the credit under Rule 6(3B) applied only to specific financial institutions, which they were not a part of.

During the hearing, the appellant's advocate emphasized that the literal interpretation of taxing statutes should be followed. They contended that since the appellant did not fall within the defined categories of 'Banking Company', 'Financial Institution', or 'Non Banking Financial Company,' the provision of reversing 50% of the credit should not apply to them. On the other hand, the Revenue justified the impugned order, stating that the activities carried out by the appellant fell within the scope of 'Banking and other Financial Services,' warranting the restriction of cenvat credit to 50%.

Upon thorough examination of the definitions provided in the Reserve Bank of India Act, 1934, and the Finance Act, 1994, the Tribunal concluded that the appellant did not meet the criteria to be considered a 'Banking Company,' 'Financial Institution,' or 'Non Banking Financial Company.' As a result, the provisions of Rule 6(3B) were deemed inapplicable to the appellant. The Tribunal emphasized the necessity to interpret taxing statutes literally and set aside the impugned order, ruling in favor of the appellant.

In the final judgment pronounced on 20.06.2018, the Tribunal allowed the appeal, highlighting the importance of precise statutory interpretation and the specific categorization required for the application of tax provisions.