2019 (12) TMI 644 - AT - Service Tax

CENVAT Credit - common input services for taxable as well as exempt services - general insurance service - insurance auxiliary service - separate record of consumption of input service, required under rule 6(2), were not maintained - rule 6(3) of CENVAT Credit Rules, 2004 - HELD THAT - There can be no doubt that the credit availed on the impugned input services cannot be denied as the tax liability has been included in the value made over to the provider of service. Again, there can be no doubt that rule 6(1) of CENVAT Credit Rules, 2004 precludes the availment of credit attributable to input services used for providing exempted services except in circumstances of maintenance of separate accounts for receipt, consumption and inventory and taking credit only to the extent that is attributable to providing of taxable service; as an exception to these two, necessarily to be read in unison, the discharge of tax liability by restricting the debit of CENVAT credit to the percentage stipulated supra is acceptable in law. Such restriction is not, in any way, connected to the entitlement, or availability, of credit but is intended to ensure that, at any point in time, the discharge of tax liability by payment to the exchequer shall not be less than 80% of the dues. The computation of tax liability in the show cause notice has proceeded on the assumption that CENVAT credit which is not permissible to be utilised for discharge of tax liability does not accrue to the credit of the assessee and the accumulation thereof which could have been utilised after the scheme of computation was altered has not been taken notice of. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Challenge to order-in-original seeking recovery of tax amount and interest.
2. Alleged failure to restrict utilization of CENVAT credit for taxable and exempted services.
3. Interpretation of timeframe for utilization of CENVAT credit.
4. Dispute regarding discharge of tax liability and restriction on CENVAT credit utilization.
5. Claim that restriction on CENVAT credit utilization is not periodic.
6. Accumulation of CENVAT credit and delay in payment of tax.
7. Compliance with Rule 6(3)(c) of CENVAT Credit Rules, 2004.
8. Disagreement with adjudicating authority's decision on appeal.

Issue 1:
The appellant challenged the order-in-original seeking recovery of tax amount and interest. The competent Committee directed the appellant to file an appeal against the order dated 29th June 2015, which dropped recovery proceedings but confirmed interest liability.

Issue 2:
The dispute centered around the alleged failure to restrict the utilization of CENVAT credit for taxable and exempted services, without maintaining separate records as required by rule 6(2) of CENVAT Credit Rules, 2004. The excess credit utilized for tax liability beyond the eligible balance in specific months was sought to be recovered.

Issue 3:
The interpretation of the timeframe for utilization of CENVAT credit was crucial. The Tribunal relied on previous decisions and circulars to discharge the respondent from allegations of exceeding credit limits in specific months.

Issue 4:
The dispute involved the discharge of tax liability and the restriction on CENVAT credit utilization. The appellant contended that the adjudicating authority failed to assess the validity of tax liability discharge using unavailable CENVAT credit, challenging the authority's competence.

Issue 5:
Regarding the periodicity of restriction on CENVAT credit utilization, the respondent argued for a restriction limited to interest liability, even if Revenue's grounds were conceded. Full disclosure of utilization was emphasized to limit recovery beyond the normal notice period.

Issue 6:
The claim was made that the respondent's delay in discharging tax liability was the primary issue. The appellant argued that the restriction on CENVAT credit utilization was not adhered to, necessitating recovery under relevant sections of the Central Excise Act, 1944.

Issue 7:
Compliance with Rule 6(1) of CENVAT Credit Rules, 2004 was discussed, emphasizing the restriction on credit for exempted services without separate accounts. The restriction on debit of CENVAT credit was deemed acceptable to ensure timely tax payment.

Issue 8:
The disagreement with the adjudicating authority's decision on appeal was based on the computation of tax liability and the interpretation of CENVAT credit utilization rules. The Tribunal's decision in similar cases was cited to support the respondent's position, leading to the dismissal of Revenue's appeal.

In conclusion, the judgment addressed various issues related to the challenge against the recovery of tax amount and interest, the interpretation of CENVAT credit utilization rules, and the compliance with tax payment regulations. The Tribunal's decision relied on previous judgments and legal provisions to dismiss the appeal of Revenue, emphasizing the importance of maintaining separate records and adhering to CENVAT credit restrictions for taxable and exempted services.