2009 (12) TMI 182 - AT - Service Tax

Cenvat Credit-Input- The appellants are engaged in the manufacture of Non-Alloy Steel Ingots chargeable to Central Excise Duty under Chapter 72 of Central Excise Tariff and they also availed Cenvat credit of various inputs capital goods and input services under the provisions of Cenvat Credit Rules. The appellant received certain inputs and besides taking Cenvat credit of Central Excise Duty paid on those inputs also took Cenvat credit of the service tax on the GTA service availed in the transportation of those inputs by road to the factory. The Department s view is that at the time of removal of the inputs as such, as per the provisions of rule 3(5) of the Cenvat Credit Rules, the appellant should also have reversed the credit of service tax on the GTA service availed for road transportation of the goods up to the factory. On this objection by the Department, the appellant reversed the credit of service tax on the GTA service. The Assistant Commissioner vide Order-in-original confirmed the demand of service tax credit along with interest and imposed penalty of equal amount on the appellant under rule 15(2) of the Cenvat Credit Rules, 2004. On appeal to Commissioner (Appeals), the Commissioner (Appeals) vide order-in-appeal upheld the Assistant Commissioner s order. It is against this order of the Commissioner (Appeals) that the present appeal has been filed. In the light of the decision of Chitrakoot Steel Power (P.) Ltd. v. CCE 2007 (11) TMI 135 - CESTAT, CHENNAI Held that- The credit availed in respect of inputs would be only the credit of duties of excise, as there is no mention in this rule that in addition to the credit of the duty of excise, the credit of service tax in respect of services availed in bringing those goods to the factory is also required to be paid. The word inputs covers only the input goods, not the input services. In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.

Summary

Issues:
Applicability of rule 3(5) of the Cenvat Credit Rules regarding reversal of service tax credit on GTA services availed for transportation of inputs.

Analysis:
The appellants, engaged in manufacturing Non-Alloy Steel Ingots, availed Cenvat credit under the Cenvat Credit Rules for various inputs, capital goods, and input services. The dispute arose when the appellant availed Cenvat credit for service tax on GTA services used for transporting inputs to the factory but only reversed the credit of Central Excise Duty upon clearing the inputs. The Department contended that as per rule 3(5) of the Cenvat Credit Rules, the appellant should have also reversed the credit of service tax on the GTA service at the time of removal of the inputs. The Assistant Commissioner upheld the demand for service tax credit along with interest and imposed a penalty. The Commissioner (Appeals) affirmed this decision, leading to the present appeal.

None appeared for the appellant during the hearing, but they requested a decision on merits based on a Tribunal judgment in a similar case where a favorable decision was given. The Departmental Representative argued that as per rule 3(5) of the Cenvat Credit Rules, the appellant was required to reverse the credit of service tax on GTA services when removing inputs as such from the factory. He emphasized that the term "Cenvat credit" includes the credit of service tax on transportation charges for bringing goods to the factory, and thus, the impugned order was correct.

Upon considering the submissions and perusing the records, the Tribunal analyzed the provisions of rule 3(5) of the Cenvat Credit Rules. The rule mandates that when inputs on which Cenvat credit has been taken are removed as such, the manufacturer must pay an amount equal to the credit availed in respect of those inputs. The Tribunal noted that the rule only refers to the credit of duties of excise and does not explicitly require the reversal of service tax credit on input services like transportation. Referring to a previous Tribunal judgment in a similar case, the Tribunal concluded that the word "inputs" in the rule pertains to input goods and not input services. Therefore, the Tribunal set aside the impugned order, ruling in favor of the appellant and allowing the appeal.