2023 (5) TMI 1151 - AT - Service Tax

CENVAT Credit - common input services used in providing taxable services and exempted services - non-maintenance of separate record for the Cenvat credit availed as per Rule 6(2) of the Cenvat Credit Rules, 2004 - non-payment of amount as provided under Rule 6(3) ibid - whether the adjudicating authority was correct in holding that once the credit availed on common inputs /service is reversed, the appellants are not required to reverse the amount as contemplated under Rule6(3A)(ii) of the said Rules? HELD THAT - Adjudicating authority has recorded a finding that there are plethora of decisions of various appellate forums wherein it was consistently held that when the entire Cenvat credit stands reversed, it is as good as not availing the credit. The learned Commissioner has relied upon the decision of High Court in the COMMISSIONER OF C. EX., BANGALORE-III VERSUS HIMALAYA DRUG COMPANY 2011 (2) TMI 1165 - KARNATAKA HIGH COURT ; COMMISSIONER OF CENTRAL EXCISE VERSUS ASHIMA DYECOT LTD. 2008 (9) TMI 87 - HIGH COURT GUJARAT upheld by the Supreme Court in COMMISSIONER VERSUS ASHIMA DYECOT LTD. 2009 (3) TMI 975 - SC ORDER ; COMMISSIONER OF CENTRAL EXCISE VERSUS ASHIMA DYECOT LTD. 2008 (9) TMI 87 - HIGH COURT GUJARAT ; HELLO MINERALS WATER (P) LTD. VERSUS UNION OF INDIA 2004 (7) TMI 98 - ALLAHABAD HIGH COURT and some decisions of the Tribunal. The issue is no longer res integra. In the instant case, the appellants have reversed the entire credit availed by them on common inputs and to this extent the case law of LALLY AUTOMOBILES PVT. LTD. VERSUS COMMISSIONER (ADJUDICATION) , CENTRAL EXCISE 2018 (7) TMI 1679 - DELHI HIGH COURT relied upon by the authorised representative is not applicable to the facts of the case as the issue decided in Lally Automobiles Pvt. Ltd. was about reversal of proportional credit and requirement of arriving at the amount to be reversed and on reasonable and logical principles. No case has been made out by Revenue for setting aside the impugned order - impugned order does not suffer from any infirmity and so appeal filed by the Revenue is dismissed.

Summary

Issues:
The issues involved in the judgment are the compliance with Rule 6(3A) of the Cenvat Credit Rules, 2004 and the reversal of service tax credit on common input services.

Compliance with Rule 6(3A) of the Cenvat Credit Rules, 2004:
The appellants had availed service tax credit on common input services without maintaining separate records as required by Rule 6(2) of the Cenvat Credit Rules, 2004. The department sought recovery of an amount due to non-compliance with Rule 6(3) of the same rules. The Adjudicating Authority initially dropped the demand, but upon review by the Committee of Chief Commissioners, an appeal was directed to be filed by the Commissioner of Central Excise.

Reversal of Service Tax Credit:
The department argued that the appellants could not avail the benefit of Rule 6 of the Cenvat Credit Rules, 2004, as they did not comply with the conditions of Rule 6(3A). The authorized representative cited the judgment of the Hon'ble Supreme Court in the case of State of Jharkhand vs. Ambay Cements to support the argument that failure to comply with statutory requirements leads to severe consequences. Various cases were relied upon to emphasize the mandatory nature of compliance with the rules.

Decision:
After considering the arguments and case laws presented by both sides, the Tribunal concluded that the appellants had reversed the entire credit availed on common inputs, rendering the issue different from the case law cited by the authorized representative. The Tribunal found that the impugned order was legally sound, citing various decisions and the facts of the case as reasons for dismissing the appeal filed by the Revenue. The Tribunal held that no case had been made out by the Revenue for setting aside the impugned order, and as a result, the appeal was dismissed.