2018 (4) TMI 463 - AT - Central Excise

CENVAT credit - reversal of credit - input services attributable to manufacture - Held that - no evidence appears of any clearances having been effected other than of manufactured goods or of inputs as such - There is no evidence that any of these input services were utilized exclusively for the purpose of clearing inputs as such and, hence, the availment of credit is well within the provisions of rule 3 of CCR 2004 - appeal dismissed - decided against Revenue.

Summary

Issues:
Recovery of CENVAT credit on services, application of definition of 'input service', trading turnover impact on credit availed, admissibility of credit for trading, proportionality of credit availed on services, distinction between trading and clearance of inputs, availability of credit on inputs used for manufacture.

Analysis:
The case involved a dispute regarding the recovery of CENVAT credit on services by a manufacturer also engaged in trading activities. The appellant contested that the first appellate authority did not correctly apply the definition of 'input service' and placed excessive emphasis on a specific rule, contrary to established legal precedents. The appellant cited relevant tribunal decisions to support their appeal.

The respondent argued that they only cleared inputs as such, not engaged in trading, and had reversed CENVAT credit on such clearances. They maintained that the credit balance was related to inputs used in manufacturing and services exclusively for manufacturing purposes. The respondent contended that using services incidentally in the removal of inputs as such did not breach the CENVAT Credit Rules.

After considering the submissions and evidence, the tribunal found no proof of clearances other than manufactured goods or inputs as such. It was noted that trading became an exempted service only from April 2011, and the credit of duties/tax was inadmissible for trading activities under the CENVAT Credit Rules. The tribunal distinguished the decisions cited by the appellant, emphasizing that clearance of inputs was not subject to the same restrictions as trading.

The tribunal rejected the appellant's claim that reversal of credit on services was not required, highlighting that input services could not be cleared as such. As there was no evidence of trading activities that would nullify the credit availed on goods, the disallowance of CENVAT credit on services in proportion to the value of clearance of inputs as such was deemed unjustified. The tribunal concluded that the credit availed on inputs used for manufacturing or clearance as such was permissible under the law, dismissing the appeal by the Revenue for lacking merit.