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TMI Blog2018 (5) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... out in the Cenvat Credit Rules, 2004. The restriction/ reversal of cenvat credit on the basis of the thumb rule / formula adopted by the Revenue has no legal basis. Once the cenvat credit has been availed in respect of input services falling under Rule 2(l) the same cannot be disallowed by taking recourse to any thumb Rule or formula. With effect from 01.04.2016 in Rule 6(l) of the Cenvat Credit Rules stand amended by including Explanation (iii) but such amendment cannot be extended to the prior period. Appeal disposed off. - S.T. Appeal No. 55655 of 2014 & ST/Misc. No. 50297/2018 - Final Order No. 51950/ 2018 - Dated:- 22-5-2018 - Hon ble Mr. V. Padmanabhan, Member (Technical) And Hon ble Mr. Ajay Sharma, Member (Judicial) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue provided was about ₹ 19.74 crore but paid Service tax of about ₹ 2.09 crore. The Audit team observed that the bulk of the Service tax paid is out of cenvat credit. Show cause notice dated 09.04.2013 was issued to the appellant alleging that Service Tax was irregularly availed by the appellant. The Department was of the view that major portion of the input service was being used for there own organisation and only a very small portion in providing of output taxable service to other service recipients. In the show cause notice, the Revenue adopted a ratio of their output taxable service divided by total expenditure incurred during the year and proceeded to restrict the cenvat credit availed alleged on the basis of the said for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch activities were included as exempted service only with effect from 01.04.2016 but the amendment carried out in Rule 6(i) of the Cenvat Credit Rule is not relevant since the dispute is for prior period be applicable. (iii) Ld. C.A. argued that during the course of audit, the Revenue identified only cenvat credit amount to ₹ 1.27 lakh as inapplicable input services pertaining to aquarium, gymnasium etc. The same is not being disputed. Further, an amount of ₹ 33,000/- which has been confirmed is not disputed on certain other grounds. He argued that in respect of all the input services, these are covered by the definition of Section 2(l) of the Cenvat Credit Rules, 2004 and hence the Revenue is not justified in disallowing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to total service tax liability payable for the output service. Further, as seen from the show cause notice and the impugned order, we note that the Revenue has adopted a thumb rule in determining what would be the allowable amount of input service credit. The Department worked out the ratio of the value of total output service in relation to the total amount of expenditure incurred during the year and proceeded to restrict the cenvat credit allowable in the same ratio. This thumb rule adopted by Revenue has been seriously challenged during the course of this appeal. It has been argued on behalf of the appellant that there is no basis in the statute for adopting such a formula for restricting the entitlement of the cenvat credit on in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the absence of any such ground, we are of the view that the cenvat credit availed cannot be denied to the appellant. 10. The circumstances in which the cenvat credit availed can be restricted or reversed is also specifically spelt out in the Cenvat Credit Rules, 2004. The restriction/ reversal of cenvat credit on the basis of the thumb rule / formula adopted by the Revenue has no legal basis. Once the cenvat credit has been availed in respect of input services falling under Rule 2(l) the same cannot be disallowed by taking recourse to any thumb Rule or formula. 11. The adjudicating authority has held that the KDMIPE is a Division of ONGC who also renders service to other ONGC Divisions. In respect of such services no service tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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