2019 (5) TMI 512 - AT - Service Tax

CENVAT Credit - duty paying invoices - credit taken on 'Advance Transfer Debit' (ATD) issued by Central procuring offices - HELD THAT - This issue is squarely covered in favour of the appellant, by the precedent order of this Tribunal in the case of BHARAT SANCHAR NIGAM LTD. ERODE VERSUS COMMISSIONER OF CENTRAL EXCISE, SALEM 2013 (12) TMI 742 - CESTAT CHENNAI where it was held that considering the commercial practice which was necessary for efficient procuring the equipment in question, this procedural lapse cannot be considered as a reason to deny Cenvat credit involved - credit allowed. Utilization of Cenvat credit - utilisation of excess of 20% of input tax - HELD THAT - The issue is no more res integra and the same is covered in favour of the appellant - assessee by precedent ruling of this Tribunal in IDEA CELLULAR LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, ROHTAK 2009 (2) TMI 91 - CESTAT NEW DELHI wherein the issue was whether the common input services used for providing taxable and exempted output services to be restricted to 20% of exempted services. It was further held that the restriction under Rule 6(3)(c) is not applicable to capital goods credit - also as per CBEC Circular dated 1st October, 2007 the only restriction with respect to Cenvat credit on capital goods was that if the capital goods used exclusively for manufacture or rendering a non taxable services - credit allowed. Short payment of service tax - period of April, 2007 to February, 2008 - Principles of natural justice - HELD THAT - There is violation of the natural justice as verification was going on and still pending and even further carried out after passing of the impugned order. No such report is discussed in the order nor any reason assigned for none receipt of any report in the matter - appeal is allowed by way of remand to the Adjudicating Authority to hear the appellant, considering the verification reports as may be available, or to give further verification if required and thereafter to pass the reasoned order in accordance with law on this issue. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Cenvat credit on 'Advance Transfer Debit' (ATD)
2. Utilization of Cenvat credit exceeding 20% of input tax
3. Allegation of Service Tax short paid

Analysis:

Issue 1: Cenvat credit on 'Advance Transfer Debit' (ATD)
The appeal was filed against the demand confirmation by the Commissioner. The first issue involved the Cenvat credit taken on 'Advance Transfer Debit' (ATD) amounting to ?5,72,79,745. The Tribunal found precedent support in the case of M/s Bharat Sanchar Nigam Ltd. Vs CCE, and ruled in favor of the appellant based on previous Tribunal orders.

Issue 2: Utilization of Cenvat credit exceeding 20% of input tax
The second issue pertained to the utilization of Cenvat credit exceeding 20% of input tax, totaling ?47,38,186. The appellant argued that Rule 6(3)(c) did not apply to Cenvat credit on capital goods, citing the case of M/s Idea Cellular Ltd. Vs CCE. The Tribunal agreed with the appellant, emphasizing that the restriction under Rule 6(3)(c) did not extend to capital goods credit, as clarified in a CBEC Circular.

Issue 3: Allegation of Service Tax short paid
Regarding the allegation of Service Tax short paid amounting to ?34,41,234, the appellant contended that there was no underpayment. They explained that the apparent shortfall was due to changes in the service tax rate structure during the period under scrutiny. The Tribunal noted a violation of natural justice as verification was ongoing even after the impugned order was passed. Consequently, the appeal was allowed, except for the ground of short payment, with a direction for the Adjudicating Authority to conduct further verification and issue a reasoned order.

In conclusion, the Tribunal ruled in favor of the appellant on the issues of Cenvat credit and directed a remand for further verification and a reasoned order on the allegation of Service Tax short payment.