2024 (3) TMI 918 - AT - Service Tax

CENVAT Credit - common cenvat credit account for manufacture of dutiable goods as well as a provider of output services - non-maintenance of separate records - penalty - HELD THAT - The assessee is a manufacturer of dutiable goods as well as a provider of output services and in the Cenvat Credit Rules, there is no provision to maintain a separate account for input/input services used for manufacturing activity and the separate account to be made for input or input services used for providing output services. There is a common cenvat credit account, which was used for payment of other duty or service tax. In that circumstances, the show-cause notice was not required to be issued as held by this Tribunal in the case of M/S. LARSEN TOUBRO LIMITED VERSUS COMMISSIONER OF CGST CX, BHUBANESWAR COMMISSIONERATE 2022 (10) TMI 1077 - CESTAT KOLKATA wherein this Tribunal has held It has been held in numbers of cases that as far as the inputs or input services are availed on payment of duty and as long as they are capable of being used in the provision of Service Tax and manufacture of excisable goods, credit cannot be denied and that there is no requirement of oneto- one correlation. Penalty u/r 15 of the Cenvat Credit Rules, 2004 - HELD THAT - As the demand is not sustainable, therefore, the question of imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004, does not arise. Thus, no demand is sustainable against the assessee. Accordingly, assessee s appeal is allowed.

Summary

Issues:
The issues involved in the judgment are the entitlement of the assessee to utilize the common cenvat credit account for payment of service tax and the imposition of penalty under Section 76 of the Finance Act, 1994.

Entitlement to Utilize Common Cenvat Credit Account:
The appellant, a manufacturer of dutiable goods and a provider of output services, maintained a common cenvat credit account for input or input services. The Revenue contended that the assessee cannot use the common cenvat credit account for payment of service tax, leading to proceedings against the assessee. The Adjudicating authority rejected the claim for utilization of cenvat credit for service tax payment, confirming the demand and imposing a penalty under Section 76 of the Finance Act, 1994.

Legal Precedents and Interpretations:
The Tribunal referred to the case of Larsen & Toubro Limited Vs. Commissioner of CGST & Central Excise, Bhubaneswar, where it was held that there is no requirement for a one-to-one correlation and cross-utilization of credit is permissible. The Tribunal also cited a CBEC circular stating that Cenvat credit on inputs and input services used for manufacturing goods or providing services is available in a common pool and can be used for payment of Excise duty or Service Tax. The Hon'ble High Court of Bombay also supported the cross-utilization of credit for payment of excise duty on manufactured goods, emphasizing that such cross-utilization is not prohibited.

Decision and Conclusion:
The Tribunal held that the demand against the assessee is not sustainable, allowing the assessee's appeal. Consequently, as the demand was deemed unsustainable, the imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004, was not warranted. Thus, the Revenue's appeal was dismissed. The judgment emphasized the permissibility of cross-utilization of credit and the absence of a requirement for one-to-one correlation, ultimately ruling in favor of the appellant and rejecting the demand and penalty.