2022 (10) TMI 1077 - AT - Central Excise

CENVAT Credit - inputs - capital goods - input services - Consulting Engineering Services - Supply of Tangible Goods Services - period from October 2011 to March 2012 - appeal rejected on the ground that the CENVAT Credit which has been utilized for payment of Service Tax on output service has been availed as a manufacturer and should have been utilized for payment of duties related to manufacture of excisable goods and not for payment of Service Tax payable on output services provided by the Appellant. HELD THAT - A manufacturer of excisable goods can take credit of CENVAT paid on input services and there is no such requirement for one to one co-relation and there is no bar on the utilization of CENVAT credit availed on input services for payment of tax on excisable goods so manufactured and cleared. This issue is already settled in favour of the Appellant in various cases cited by the Appellant. Although the cases referred to are not identical in terms of the factual position, however, they decide the general principles that in respect of utilization of credit there is no requirement of one to one correlation and cross utilisation of credit is permissible. C.B.E. C. vide Letter F. No. 381/23/2010/862, dated 30-3-2010, clarified that Cenvat credit on inputs, capital goods and input services which are used for manufacture of goods or for provision of services is available in a common pool and can be used for payment of Excise duty and/or Service Tax. Credit accumulated by the service provider or manufacturer on the input services availed as well as inputs is available for payment of Excise duty or Service Tax. The impugned orders cannot be sustained and are therefore set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Wrong utilization of CENVAT Credit towards payment of Service Tax on output services.
2. Interpretation of Rule 2 & 3 of CENVAT Credit Rules, 2004 regarding cross-sectoral utilization of credit.
3. Statutory requirement of one-to-one correlation between activities of payment of Service Tax against the CENVAT Credit availed on input, capital goods, and input services.

Analysis:
1. The case involved the Appellant providing taxable services under the categories of 'Consulting Engineering Services' and 'Supply of Tangible Goods Services' and utilizing CENVAT Credit on inputs, capital goods, and input services for payment of Service Tax on output services. The dispute arose when the Department alleged wrong utilization of CENVAT Credit, disallowed the credit amount, and imposed penalties. The Ld.Commissioner(Appeals) upheld the decision, leading to the appeal before the Tribunal.

2. The Ld.Advocate for the Appellant argued that the Revenue misunderstood the provisions of Rule 2 & 3 of CENVAT Credit Rules, 2004, which allow for inter-sectoral CENVAT Credit on goods and services. Referring to the Finance Minister's speech and legal precedents, the Advocate contended that cross-sectoral utilization of credit is permitted, and there is no statutory requirement of one-to-one correlation between activities of payment of Service Tax and availed CENVAT Credit on inputs, capital goods, and input services.

3. The Authorized Representative for the Department supported the Order-in-Original, emphasizing the findings against the Appellant. However, the Tribunal, after hearing both sides and reviewing the appeal records, found in favor of the Appellant. Citing the Finance Minister's Budget Speech and legal interpretations, the Tribunal concluded that a manufacturer of excisable goods can utilize CENVAT Credit on input services for payment of tax without a one-to-one correlation requirement. The Tribunal referenced various cases and a CBEC circular to support the decision, ultimately setting aside the impugned orders and allowing the Appellant's appeal with consequential relief.

This detailed analysis of the judgment highlights the issues, arguments presented, legal interpretations, and the final decision rendered by the Tribunal in favor of the Appellant.