2015 (1) TMI 636 - AT - Central Excise

Reversal of CENVAT Credit - Availability of service tax credit on GTA service - Held that - There is no imputation that the service tax credit has been availed or utilised wrongly. Further there is no provision in the Finance Act, 1994 which would render availment of such service tax credit erroneous for the reason that some of the inputs, transport of which yielded GTA service tax credit are returned as such on being found not suitable. Commissioner (appeals) also relied upon the judgments of the Tribunal in the case of J.S.Khalsa Steels (P) Ltd. Versus CCE, Chandigarh- 2009 (7) TMI 487 - CESTAT, NEW DELHI and Hon ble High Court of Punjab & Haryana in the case of CCE vs. Punjab Steels- 2010 (7) TMI 252 - PUNJAB AND HARYANA HIGH COURT wherein it has been held that Rule 3(5) of the Rules only talks about the Cenvat credit taken on inputs or capital goods. It does not refer to the Cenvat on input service. Hon ble High Court further observed that it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language - once there is no legal provision requiring reversal of credit in respect of input service credit, there is no authority to take back such input service tax credit. - Decided against Revenue.

Summary

Issues:
- Disallowance of cenvat credit on coal removal without using it in the manufacturing process.
- Appeal against the disallowed cenvat credit.
- Availability of service tax credit on GTA service attributable to rejected inputs.
- Interpretation of Cenvat credit Rules and relevant legal provisions.

Analysis:

1. The case involved a dispute where the appellant, engaged in the manufacture of sponge iron, removed coal from the factory without utilizing it in the manufacturing process. The appellant had availed service tax credit on inward transportation but failed to reverse the credit on the coal removed. The Additional Commissioner disallowed the cenvat credit, leading to an appeal by the appellant against the order.

2. The major issue in the appeal was the availability of service tax credit on GTA service related to rejected inputs. The appellant argued that there was no provision rendering the service tax credit erroneous in such a scenario. Citing relevant legal precedents, including a CESTAT judgment and High Court rulings, the appellant contended that Rule 3(5) of the Cenvat Credit Rules only pertains to credit on inputs or capital goods, not on input services.

3. The Commissioner (Appeals) supported the appellant's position by relying on legal interpretations provided by the Tribunal and the High Court of Punjab & Haryana. The High Court's judgment emphasized the importance of plain language in interpreting tax statutes and highlighted that unless clearly specified, there is no authority to reverse input service tax credit.

4. Ultimately, the Appellate Tribunal, following the legal positions established by the High Court and the Tribunal, rejected the Revenue's appeal. The judgment highlighted that in the absence of a legal provision mandating the reversal of input service tax credit, the department had no grounds to demand the credit back.

5. The judgment reinforced the significance of legal clarity and adherence to statutory provisions in matters concerning tax credits and emphasized that taxation statutes must be interpreted based on the plain and unambiguous language used in the law. The decision upheld the appellant's right to retain the input service tax credit in the absence of explicit provisions requiring its reversal.

In conclusion, the judgment favored the appellant's stance on the availability of service tax credit on GTA service attributable to rejected inputs, highlighting the importance of legal interpretation and adherence to statutory provisions in tax matters.