2014 (11) TMI 544 - AT - Service Tax

CENVAT Credit - Balance of Cenvat Credit availed for central excise purpose, after availing exemption under central excise, utilized for payment of service tax - demand raised for disallowing cenvat credit alleged to have been lapsed and wrongly availed by respondent. - Held that - Respondent is a manufacture of excisable goods Synthetic Filament Yarn and duly registered with the Central Excise Department. The respondents also registered with the service tax authorities as commission agent , which is classifiable under Business Auxiliary Services and discharging service tax on the output service. Therefore, the respondents are not only a manufacturer of excisable goods but also the provider of output services and both the activities are carried out in the same premises. Once it is held that the respondents are eligible for availment of input credit, they can utilize the cenvat credit available with them either for payment of excise duty on the final products or for payment of service tax on the output services as stipulated in the sub-rule (4) of Rule 3 of CCR 2004. The restrictions on utilization of cenvat credit stipulated in the CCR relates only for specific type of duties i.e. education cess on excisable goods or payment of educational cess on output services. There is no restriction for utilization of common input credit availed on the inputs and also on input services for payment of excise duty or service tax. there is no infirmity in the order of Commissioner (Appeals) in holding that utilization of input cenvat credit availed by the respondents for payment of service tax on the output service of Business Auxiliary Services rendered by them - Decided against Revenue.

Summary

Issues:
- Dispute over utilization of Cenvat credit for payment of service tax on Business Auxiliary Service (BAS) by a manufacturer.
- Interpretation of CENVAT Credit Rules regarding the utilization of credit for different activities carried out in the same premises.

Analysis:
1. The Revenue filed an appeal against the Commissioner (Appeals) order regarding the utilization of Cenvat credit by the respondent, a manufacturer of Synthetic Filament Yarn, for payment of service tax on BAS. The respondent had opted for exemption under a notification and reversed the credit attributable to inputs. A show cause notice was issued for disallowing allegedly lapsed credit. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the appeal, leading to the Revenue's present appeal.

2. The Revenue contended that the inputs availed for manufacturing excisable goods cannot be used for paying service tax on output services like BAS. They argued that the activities of manufacturing goods and providing services are distinct, even if conducted in the same premises. The definition of 'inputs' in CCR 2004 and rules prohibiting the utilization of credit for service tax payment were cited.

3. The respondent, represented by an advocate, supported the Commissioner (Appeals) decision, emphasizing that the admissibility of credit was not in dispute. They argued that the Cenvat credit could be used for service tax payment as per Rule 3(4) of CCR. Case laws were cited to support their position.

4. The judge analyzed the submissions and records, noting that the Revenue's main concern was the credit utilization for service tax on BAS by the respondent. The respondent was engaged in both manufacturing excisable goods and providing output services. The admissibility of the availed Cenvat credit was not contested by the Revenue.

5. Referring to previous Tribunal decisions, the judge highlighted that Rule 3 of CCR does not mandate separate accounts for manufacturers and service providers. The rules allow for the common utilization of credit for different purposes, including payment of excise duty and service tax. The judge upheld the Commissioner (Appeals) decision based on these interpretations.

6. The judge concluded that there was no fault in the Commissioner (Appeals) order allowing the utilization of input Cenvat credit for paying service tax on output services. Citing previous Tribunal decisions, the appeal filed by the Revenue was dismissed, affirming the validity of the credit utilization by the respondent for service tax payment on BAS.

This detailed analysis of the judgment showcases the legal arguments, interpretations of relevant rules, and the final decision by the judge, providing a comprehensive understanding of the case.