2019 (3) TMI 672 - AT - Service Tax

Cenvat Credit - co-relation between input and output services - utilization of cenvat credit on various input services for payment of output service tax liability for BAS - Held that - Under the provisions of Rule 3 (1) of CCR 2004 producer of final products or a provider of output service is entitled to take credit of all duty of excise and service tax etc, paid by him which relate to the business of either manufacture or providing of output service - Further Rule 3 sub-rule 4 provides the manner of utilization of the cenvat credit once taken. It is provided that such cenvat credit once taken can be utilized for payment for duty for any final product or payment of service tax on any output service. The scheme of one to one co-relation has been done away with, under the Cenvat Credit Rules, 2004. SCN is misconceived and not maintainable - appeal allowed.

Summary

Issues:
1. Maintainability of show cause notice objecting to utilization of cenvat credit on input services for payment of output service tax liability for BAS.

Detailed Analysis:
The judgment in question revolves around the issue of the maintainability of a show cause notice dated 31st March, 2017, which objected to the utilization of cenvat credit on various input services for the payment of output service tax liability for Business Auxiliary Services (BAS). The appellant, a manufacturer of plastic storage tanks, had registered their factory office at a different location for centralized registration under the provisions of Service Tax. The appellant received input services for providing the output service of BAS, including services like GTA, rent a cab service, manpower service, legal service, and rent of immovable property. The appellant took cenvat credit of these services at their centralized registration office and discharged the service tax for the output service rendered. However, during an audit, it was observed that most of the invoices for input services were not directly related to the BAS output service provided by the appellant. The show cause notice proposed to demand the Service Tax utilized for the payment of output tax of BAS along with interest and penalty.

The appellant contested the show cause notice, which was adjudicated with the proposed demand confirmed along with an equal amount of penalty. The appellant then appealed before the Commissioner (Appeals), who dismissed the appeal. Upon considering the contentions and facts presented, the judgment highlighted the provisions of Rule 3 (1) of Cenvat Credit Rules, 2004, which allow a producer of final products or a provider of output service to take credit of duty of excise and service tax paid by them related to their business. Rule 3 sub-rule 4 provides the manner of utilization of cenvat credit once taken, allowing it to be used for payment of duty for any final product or payment of service tax on any output service. The judgment emphasized that the scheme of one-to-one correlation has been done away with under the Cenvat Credit Rules, 2004. Consequently, the judgment held that the show cause notice was misconceived and not maintainable.

In conclusion, the appeal was allowed, and the impugned order was set aside. The appellant was deemed entitled to consequential benefits, if any. The judgment was pronounced in the open court by the Member (Judicial) of the Appellate Tribunal CESTAT New Delhi, Shri Anil Choudhary.