2023 (12) TMI 482 - AT - Service Tax

CENVAT Credit - inputs/capital goods - MS items like angles, channels, beams, etc., falling under Chapter 72 73 of CETA - Chargeability of interest under Rule 14 of CCR on the amount of Cenvat credit taken and reversed - extended period of limitation. Credit on MS items - HELD THAT - Hon ble High Court of AP in COMMR. OF C. EX., VISAKHAPATNAM-II VERSUS SAI SAHMITA STORAGES (P) LTD. 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT have held that inputs like cement, steel, etc., used for construction of warehouses from which taxable services under the head renting of immovable property are performed, the inputs are eligible for Cenvat credit - credit allowed. Chargeability of interest under Rule 14 of CCR on the amount of Cenvat credit taken and reversed - it is claimed that there has been subsequent amendment in Rule 14, wherein it has been provided that interest is chargeable on Cenvat credit taken and utilized - HELD THAT - In view of the ruling of Hon ble Apex Court in UOI AND ORS. VERSUS IND-SWIFT LABORATORIES LTD. 2011 (2) TMI 6 - SUPREME COURT and as the period falls prior to the amendment of Rule 14, and there is no specific mention in the amending Act that amendment shall apply retrospectively, the charging of interest is upheld. The Appeal allowed in part to the effect that Cenvat credit has been rightly taken and also hold that interest is rightly charged. All penalties imposed are set aside, in the facts and circumstances of the case.

Summary

Issues involved:
The issues involved in this Appeal are:
1. Entitlement to Cenvat credit for credit taken on MS items falling under Chapter 72 & 73 of CETA.
2. Reversal of credit taken during a specific period and demand for interest on the reversed amount.

Entitlement to Cenvat credit for MS items:
The Appellant availed Cenvat credit amounting to Rs.77,21,700/- on MS items like angles, channels, beams, etc., categorized as capital goods. The dispute revolved around whether these items qualified as inputs/capital goods. The Tribunal referred to precedents such as Mundra Ports and SEZ Ltd and Sai Samhita Storages Pvt Ltd, where it was held that inputs like cement and steel used for construction purposes were eligible for Cenvat credit. Relying on these rulings, the Tribunal allowed this ground in favor of the Appellant.

Chargeability of interest on reversed credit:
A Show Cause Notice (SCN) was issued invoking the extended period of limitation, alleging that the Appellant had wrongly taken Cenvat credit and subsequently reversed a portion of it. The issue was whether interest under Rule 14 of CCR was chargeable on the reversed amount of Rs.60,88,605/-. The Appellant argued that an amendment in Rule 14 postdates the period in question and relied on the ruling in Bill Forge Pvt Ltd. However, the Revenue cited the ruling of the Hon'ble Chattisgarh High Court in CCE & C vs Vandana Vidyut Ltd, holding that interest is payable even when the credit is taken and reversed before utilization. The Tribunal upheld the charging of interest based on the ruling of the Hon'ble Apex Court in Ind-swift Laboratories Ltd, as the period fell before the amendment of Rule 14 without any retrospective application mentioned in the amending Act.

Conclusion:
The Tribunal allowed the Appeal in part, confirming the correctness of the Cenvat credit taken and the charging of interest. However, all penalties imposed were set aside based on the facts and circumstances of the case.