2017 (11) TMI 1391 - AT - Central Excise

CENVAT credit - common input services used towards trading as well as manufacturing activity - non-maintenance of separate records - Rule 6 (3) of CCR, 2004 - Held that - identical issue decided in the case of CST vs. Machine Tools (I) Pvt. Ltd. 2017 (8) TMI 833 - CESTAT NEW DELHI , where it was held that it is clear that no credit is available on any input service attributable to trading during the material time. When no such credit is eligible, the respondent cannot avail the benefit of cenvat credit scheme - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Availment of credit on common input services without maintaining separate accounts.
2. Applicability of Rule 6(3)(i) of the Credit Rules.
3. Reversal of proportionate credit by the respondent.
4. Legal position regarding trading as an exempted service.
5. Commissioner's insistence on reversing CENVAT credit.

Analysis:
1. The case involved a dispute regarding the respondent-assessee's availing of credit on common input services without maintaining separate accounts. The department contended that the respondent did not maintain separate accounts for common input services used in manufacturing and trading activities, leading to a demand for payment under Rule 6(3)(i) of the Credit Rules.

2. The respondent argued that they had reversed the proportionate credit of common input services for all years and informed the department about it through various correspondences. They claimed that since they had already reversed the credit, the demand under Rule 6(3)(i) was not sustainable. The respondent also highlighted their proactive communication with the department regarding the reversals made.

3. The Tribunal referred to previous judgments, such as CST vs. Machine Tools (I) Pvt. Ltd., emphasizing that trading was not considered an exempted service before a specific amendment. The Tribunal held that no credit could be availed on input services attributable to trading during the relevant period. It was stated that the respondent, being a trader and service provider, could only avail credit on input services attributable to taxable output services.

4. Another case, Dalmia Bharat Sugar & Industries Ltd. vs. CCE, was cited to support the view that the Commissioner could not insist on reversing CENVAT credit under Rule 6(3)(i) if the assessee had opted for a different option. The Tribunal held that the appellant had the liberty to choose the option under the rules, and the Department could not compel a specific choice.

5. Ultimately, the Tribunal upheld the impugned order, citing previous decisions and finding no reason to interfere. The appeal filed by the department was dismissed, and the matter was remanded to the original authority for verification of the reversal of credit made by the appellant to ensure compliance with Rule 6(3)(ii) of the Credit Rules.