2009 (9) TMI 514 - AT - Central Excise

Cenvat Credit- Input removed as such- the appellants are engaged in the manufacture of Iron and Steel Ingots classifiable under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. They were availing Cenvat credit benefit on final product. They also paid service tax on the transportation of goods by road. The appellants removed the inputs as such after reversal of Cenvat credit on input availed by them under Rule 3(5) of Cenvat Credit Rules, 2004 during the period January, 2005 to October, 2005. It has been alleged that the appellants had not reversed the Cenvat credit of service tax availed in respect of transportation of goods by road. Original authority confirmed the demand of Rs. 62,948/- and appropriated the said amount as deposited by them and also imposed penalty of equal amount along with interest. Commissioner (Appeals) upheld the adjudication order. In the light of the decision of Chitrakoot Steel & Power Pvt. Ltd. v. CCE, Chennai, 2008 -TMI - 3795 - CESTAT, CHENNAI held that- impugned order is not sustainable, it is liable to be set aside.

Summary

Issues:
1. Availing Cenvat credit benefit on final product and service tax on transportation of goods by road.
2. Allegation of not reversing Cenvat credit of service tax availed in respect of transportation of goods by road.

Analysis:
Issue 1: The appellants were engaged in manufacturing Iron and Steel Ingots and availing Cenvat credit benefit on the final product. They also paid service tax on the transportation of goods by road. The appellants removed the inputs after reversing Cenvat credit on input availed by them. The original authority confirmed the demand and imposed a penalty, which was upheld by the Commissioner (Appeals).

Issue 2: The Advocate for the appellants argued that Rule 3(5) of the Cenvat Credit Rules, 2004 does not provide for reversal of input service credit. He contended that Rule 3(1) allows credit on duty paid on inputs, capital goods, and any input service separately. The Revenue representative, on the other hand, supported the findings of the Commissioner (Appeals), stating that Rule 3(5) mandates payment equal to the credit availed in respect of inputs or capital goods when removed, including input service credit.

The Tribunal analyzed Rule 3 of the Rules, emphasizing that Rule 3(1) allows credit on any input or capital goods and any input service, while Rule 3(5) requires payment equal to the credit availed in respect of inputs or capital goods upon removal. The Tribunal held that the appellants were only required to reverse the equal amount of input credit on removal of inputs, not input service credit. Referring to a previous case, the Tribunal concluded that the demand for service tax and Education Cess was unsustainable, vacating the same and allowing the appeal with consequential relief.

In conclusion, the Tribunal set aside the impugned order, finding it unsustainable and allowing the appeal with consequential relief.