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2024 (2) TMI 966 - AT - Service TaxCENVAT Credit - input services used in the provision of exempted services - appellants have maintained separate accounts of the same in terms of the Cenvat Credit Rules, 2004 or not - incorrect availment and utilisation of CENVAT credit - reversal of credit claimed by the appellants would suffice in the facts and circumstances of the case or not - appellants are liable to pay the amounts demanded along with interest and penalty on above or not. CENVAT Credit - input services used in the provision of exempted services - appellants have maintained separate accounts of the same in terms of the Cenvat Credit Rules, 2004 or not - HELD THAT - From the analysis of the legal provisions of Rule 6 ibid, as it stood during the relevant time of the disputed period (prior to the amendment brought w.e.f. 01.04.2016), we find that the appellants was allowed to maintain separate accounts for the receipt and use of input services, used (i) for the provision of exempt services and (ii) for the provision of output services excluding exempt services , and take credit of input services used in the provision of taxable output services other than the exempt services , which is independent of the optional provision under Sub-rule (3) of Rule 6 ibid. It is found from the records that the appellants have provided for various periods the list of projects/sites/contracts which are taxable services and exempt services besides the trading activity and the month-wise Cenvat credit involved in input services vide their letter 24.02.2014 addressed to the department in replying to the audit objections raised in this regard - it cannot be said that not even single piece of evidence was submitted by the appellants regarding the nature of projects and did not maintain separate accounts for the exempt services taxable services, as held by the original authority in the impugned orders. Inasmuch as the Cenvat credit amount relating to exempt services/projects, taxable services/projects and trading activity, having been separately accounted for in the books of accounts by the appellants, it can be concluded that the appellants have satisfied the requirement of maintaining separate accounts for receipt and use of input services in terms of the Cenvat Credit Rules, 2004. The views have been duly supported by the Coordinate Bench of this Tribunal who had examined the issue of the admissibility of Cenvat credit in similar cases where the inputs and/or input services are used in manufacture/provision of dutiable as well as exempted products/services. The Co-ordinate Bench in RESPONSIVE INDUSTRIES LTD. and AXIOM CORDAGES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, THANE-II 2022 (8) TMI 639 - CESTAT MUMBAI had examined the above issue in respect of the appellant who had reversed the Cenvat credit in respect of exempt services, by holding that inasmuch as the quantum or method adopted by the appellant was not questioned by the department, the demand of Cenvat credit cannot be sustained. Whether the appellants had incorrectly availed and utilised CENVAT credit? - HELD THAT - It is not the department s case that the Cenvat credit taken in respect of taxable services/projects and those Cenvat credit not taken in respect of exempt projects are incorrect, in terms of any specific document or record. In fact, it is found that in respect of show cause notice proceedings initiated against the appellants subsequently on 28.10.2016 and 30.05.2017 by the department in confirmation of adjudged demands relating to Cenvat credit in respect of trading activity, the learned Commissioner (Appeals) vide Order-in- Appeal dated 23.08.2018 and 09.01.2019, by examining the compendium of 49 work orders related to taxable sites and exempt sites, and after considering the credit involved in common services that had been reversed proportionately on the basis of turnover ratio had dropped the demands confirmed by the original authorities. It has also been held in the said appellate orders that furnishing of such voluminous details can only be possible only when the records are maintained separately, and the finding of lower authority that the appellant did not maintain separate account of the taxable services as well as exempted services was also not sustained. The Hon ble Supreme Court in the case of Chandrapur Magnet Wires (P) Limited 1995 (12) TMI 72 - SUPREME COURT had held that in case where an assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final product that are exempted, and subsequently makes a debit entry in respect of exempt final product, then this debit entry would make such credit entry stand deleted in the accounts of the assessee, maintaining that in effect no Cenvat credit was taken in respect of exempt final products - Further, in view of the above judgement of the Hon ble Apex Court, it could be concluded that the reversal of Cenvat credit in respect of common input services by the appellants is sufficient for compliance with the Cenvat Credit Rules, 2004. There are no merits in the impugned orders passed by the learned Commissioner, Nagpur in confirmation of the adjudged demands in the impugned orders in terms of Cenvat Credit Rules, 2004 and accordingly the same is set aside - Since the confirmation of the demands cannot be sustained under Rule 6(3) ibid, the demand for interest and imposition of penalty in the impugned orders also need to be set aside. The impugned orders dated 24.02.2017 and 20.12.2017 cannot be sustained and are set aside - Appeal allowed.
Issues Involved:
1. Whether the appellants have availed credit of input services used in the provision of exempted services and maintained separate accounts. 2. Whether the appellants had incorrectly availed and utilized CENVAT credit and if the reversal of credit would suffice. 3. Whether the appellants are liable to pay the amounts demanded along with interest and penalty under the impugned orders. Summary: Issue 1: Availment of Credit of Input Services Used in Exempted Services The appellants, engaged in providing various taxable and exempt services, were observed by the Department to be availing Cenvat credit on input services used for both taxable and exempt services without maintaining separate records. The appellants contended that they did not claim Cenvat credit for input services solely used for exempt services and maintained separate project-wise accounts. They reversed the portion of Cenvat credit attributable to common input services used for exempt services, which was communicated to the Department. The Tribunal found that the appellants had provided sufficient evidence of maintaining separate accounts for taxable and exempt services, satisfying the requirements of the Cenvat Credit Rules, 2004. Issue 2: Incorrect Availment and Utilization of CENVAT Credit The appellants argued that they had not availed any Cenvat credit on common services as alleged and had reversed the credit initially taken. The Tribunal referred to various case laws, including the Supreme Court's judgment in Chandrapur Magnet Wires (P) Limited, which held that reversal of wrongly availed credit should be considered as if no credit was availed. The Tribunal concluded that the appellants' reversal of Cenvat credit was sufficient compliance with the Cenvat Credit Rules, 2004, and that the Department had not provided specific evidence to prove incorrect availment of credit. Issue 3: Liability to Pay Demands, Interest, and Penalty The Tribunal found that the confirmation of demands under Rule 6(3) of the Cenvat Credit Rules, 2004, was not sustainable. It was held that the appellants could not be forced to opt for payment of a prescribed percentage of the value of exempted services. Consequently, the demands for interest and imposition of penalties were also set aside. Conclusion: The Tribunal set aside the impugned orders dated 24.02.2017 and 20.12.2017, allowing the appeals filed by the appellants with consequential relief. The appellants were found to have complied with the Cenvat Credit Rules, 2004, by maintaining separate accounts and reversing the credit for exempt services.
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