2018 (12) TMI 426 - AT - Service Tax

CENVAT Credit - common inputs and input services used of manufacture of goods as well as for taxable and exempt service - non-maintenance of separate records - Rule 6(3A) of CCR 2004 - Extended period of limitation - Held that - The intention of the Legislature was that a manufacturer or a service provider should not avail the entire CENVAT credit of the service tax paid on common input services and should avail proportionate credit attributable to the taxable output service for which the CENVAT credit Rules provides for maintaining separate accounts. Appellant herein has followed this rule by taking the credit of only an amount which is attributable to the taxable services provided by him and not availing the CENVAT credit of the input services which are attributable to the trading activity. By availing only the CENVAT credit of the service tax paid attributable to the taxable services, in my view, appellant had complied with the provisions of Rule 6(2). The decision in the case of M/S. TRANS ASIAN SHIPPING SERVICES PVT LTD VERSUS THE COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX (VICE-VERSA) 2018 (9) TMI 922 - CESTAT BANGALORE , is directly applicable to the facts of present case, where it was held that the appellants have maintained separate records and as such, there is force in the arguments made by learned counsel for the appellant-assessee. Extended period of limitation - the records of the appellant were audited time and again by EA 2008 audit - Held that - The audits were regularly conducted and this objection was never raised, in view of it, even on limitation also appellant succeeds. Appeal allowed on merits as well as on limitation.

Summary

Issues:
1. Interpretation of Rule 6(2) of Cenvat Credit Rules, 2004 regarding availing CENVAT credit.
2. Application of extended period for demanding ineligible CENVAT credit.

Analysis:

Issue 1: Interpretation of Rule 6(2) of Cenvat Credit Rules, 2004 regarding availing CENVAT credit:
The appeal involved a dispute over the availing of CENVAT credit by the appellant for common input services used for both taxable and non-taxable activities. The Revenue contended that the appellant should have maintained separate accounts as per Rule 6(2) of Cenvat Credit Rules, 2004. The appellant argued that they had reversed the CENVAT credit for non-taxable activities based on a mathematical formula. The Tribunal analyzed the provisions of Rule 6(2) and found that the appellant had complied with the rule by availing only the credit attributable to taxable services. The Tribunal referred to previous judgments like Trans Asian Shipping Services Pvt. Ltd. and Sify Technologies Ltd. to support its decision. It held that the appellant's method of availing CENVAT credit was in accordance with the rule, thereby setting aside the impugned order.

Issue 2: Application of extended period for demanding ineligible CENVAT credit:
Regarding the application of the extended period for demanding ineligible CENVAT credit, the appellant argued that audits were regularly conducted, and no misstatement or suppression of facts was found. The Tribunal agreed with the appellant, citing the judgment of Sanjay Automobile Engineering Pvt. Ltd., which held that regular audits prevent allegations of misstatement or suppression of facts. As a result, the Tribunal ruled in favor of the appellant on the issue of limitation as well.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal of the appellant on both merits and limitation grounds. The decision highlighted the importance of interpreting and applying Rule 6(2) of the Cenvat Credit Rules, 2004 correctly and emphasized the significance of regular audits in determining the applicability of the extended period for demanding ineligible CENVAT credit.