2016 (4) TMI 108 - HC - Central Excise

Cross utilization of the credit on excuse duty and service tax denied - Held that - The accounts are maintained in relation to payments of both levies. Even that does not present any difficulty once the Revenue has issued a circular to guide the officers. That circular, a copy of which is handed over to us and contained in the compilation at page 36, is dated 30 March 2010. It is on the subject of cross utilization of credit on inputs and input service. The Tribunal, therefore, has rightly come to the conclusion that there are certain restrictions on the utilization of particular type of duty and for that purpose it has relied on Rule 7 of CENVT Credit Rules. A reference to that also does not vitiate the impugned order inasmuch as Rule 7 states that input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the conditions stipulated therein. In such circumstances, the cross utilization of credit on goods and services being not covered by any restrictive provision, leave alone any prohibition or embargo, the Tribunal s order does not call for any interference. The interpretation placed on the Rule is a probable and a possible view.

Summary

Issues:
1. Interpretation of CENVAT Rules regarding cross-utilization of credit on excise duty and service tax.
2. Whether the Tribunal's order raises a substantial question of law.
3. Analysis of Rule 3(1) and Rule 7 of CENVAT Credit Rules.
4. Verification of accounts and circular issued by Revenue for guidance on cross-utilization of credit.
5. Conclusion on the admissibility of credit and absence of revenue deficit.

Analysis:
The High Court addressed the issue of the interpretation of CENVAT Rules concerning the cross-utilization of credit on excise duty and service tax. The Court noted that the Tribunal concluded that credit is admissible during the manufacture of the final product, allowing cross-utilization without any prohibition. Rule 3(1) of the Rules permits the manufacturer or producer to take credit on various duties, including excise duty and service tax. The Court found that the Tribunal's analysis of the rules did not exhibit any perversity, emphasizing that the only challenge may arise during the scrutiny and verification of accounts. However, the existence of a circular issued by the Revenue to guide officers on cross-utilization alleviated this concern.

Regarding the substantial question of law raised by the Tribunal's order, the Court determined that the interpretation of the Rule was reasonable and not perverse. Rule 7 of the CENVAT Credit Rules was also examined, which allows the distribution of credit on input services to manufacturing units or units providing output service. The absence of any restrictive provision on cross-utilization of credit on goods and services led the Court to conclude that the Tribunal's order did not warrant interference.

The Court highlighted that the interpretation of the Rule was a plausible view and did not result in any revenue deficit or loss. Consequently, the Court dismissed the appeal, stating that it did not raise any substantial question of law. The judgment concluded by emphasizing that the appeal was not deserving of further consideration, and no costs were awarded.