2020 (3) TMI 757 - AT - Service Tax

CENVAT Credit - common input services - non-maintenance of separate records - Rule 6(3)(c) of CCR 2004 - HELD THAT - The Ld. Commissioner should be given an opportunity to examine the issue from the point of view of the appellant s eligibility to avail the CENVAT Credit and utilise it after 01.04.2008. If the appellant is so eligible the only mistake of the appellant is utilising the CENVAT Credit well in advance of the date when he was not entitled to utilise it. The interest for the differential period may have to be calculated and recovered. Ld. Commissioner should also examine the claim that there was no demand in terms of revised Rule 6(3)(c) of CCR 2004 - matter remanded to the adjudicating authority for denovo adjudication - appeal allowed by way of remand.

Summary

Issues:
- Irregular availing of CENVAT Credit
- Utilization of CENVAT Credit for both taxable and exempted services
- Failure to maintain separate accounts for input services
- Demand of recovery, interest, and penalties
- Interpretation of rules regarding utilization of CENVAT Credit
- Appellant's eligibility to avail and utilize CENVAT Credit post 01.04.2008

Analysis:
The appellant, a service provider registered with the Service Tax Department, was found to have availed CENVAT Credit on input services used for both taxable and exempted services without maintaining separate accounts as required by Rule 6(2) of CENVAT Credit Rules, 2004. The department issued a show cause notice demanding recovery of irregularly availed CENVAT Credit, interest, and penalties under Rule 15(4) of CCR 2004 read with Section 78 of the Finance Act, 1994. The Ld. Commissioner confirmed the irregularly availed amount, interest, and imposed penalties, leading to the appellant filing an appeal against the order.

During the appeal, the appellant argued that they were only prohibited from utilizing, not taking, CENVAT Credit until 01.04.2008. They contended that the restrictions on utilization were removed post that date, and they could have utilized the credit in the subsequent financial year. The appellant relied on a previous Tribunal order to support their claim that restrictions on utilization did not extend to availing CENVAT Credit. They also disputed the demand for payment equal to 8% of the value of exempted services post 01.04.2008, citing no demand under the amended Rule 6(3)(c) of CCR 2004 for that period.

After considering both sides, the Tribunal opined that the Ld. Commissioner should re-examine the appellant's eligibility to avail and utilize CENVAT Credit post 01.04.2008. If found eligible, the focus should be on the timing of utilization, potentially necessitating the calculation and recovery of interest for the differential period. The Ld. Commissioner was directed to review the absence of demand under the revised Rule 6(3)(c) of CCR 2004 post 01.04.2008. The matter was remanded to the adjudicating authority for a fresh adjudication without expressing any opinion on the case's merits, ultimately allowing the appeal for remand to the original authority.