2010 (2) TMI 375 - AT - Service Tax

Cenvat Credit- the demand of amounts as indicated herein has arisen on the ground that the appellants, who are engaged in the manufacture of ARCS panels, Energy meters, Semi-conductor devices, Solar Photovoltaic cells/modules, etc., had availed credit of common input services and have not maintained separate account for the same as they are manufacturing and clearing goods which are dutiable and which are exempted from payment of duty. Show cause notice dated 4-4-2008 was proposed to demand the amount for the period March, 2007 to January, 2008. Held that- the said restriction of maintaining separate accounts may be only in respect of the inputs and not input services. This proposition requires detailed analysis of the rules and the appreciation of the various case laws which have been cited by the ld. Counsel. In the considered view that the appellant has not made out a prima facie case for complete waiver of the amount confirmed by the lower authorities. Accordingly, direct the appellant to deposit an amount of Rs. 10 lakhs (Rupees ten lakhs only) within a period of four weeks from the date of receipt of this order and report compliance on 22-3-2010. Subject to such compliance, pre-deposit of balance amounts involved is waived and recovery thereof stayed till disposal of the appeal.

Summary

Issues: Utilization of credit of service tax on input services for dutiable and exempted products.

In this case, the appellant, engaged in manufacturing various products, availed credit of common input services without maintaining separate accounts for dutiable and exempted goods. The show cause notice demanded a significant amount for the period March 2007 to January 2008. The Order-in-Original confirmed the demand but reduced it to Rs. 90,14,074. The appellant argued that they had already reversed proportionate credit as per Rule 6, emphasizing that Rule 6(3) does not apply to input services. The appellant contended that input services used directly or indirectly in manufacturing final products are covered under the definition of input services for availing credit, irrespective of being used for dutiable or exempted goods.

The Jt. CDR argued that the adjudicating authority provided detailed reasoning for confirming the demand, granting benefits due to the appellant. The Tribunal analyzed Rule 6 of Cenvat Credit Rules, noting that the requirement to maintain separate accounts may only apply to inputs and not input services. The Tribunal found the issue arguable, requiring detailed analysis of rules and case laws cited by the appellant. Consequently, the Tribunal directed the appellant to deposit Rs. 10 lakhs within four weeks and report compliance. Upon compliance, the pre-deposit of the remaining amounts was waived, and recovery stayed pending appeal disposal.