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TMI Blog2018 (7) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such credit is utilised in the payment of duties. On 18.05.2015, CERA examined their records and observed certain infirmities in the manner of availment of Cenvat credit by the appellant. According to CERA, the appellant had utilised credit on inputs and input services used for the manufacture of exempted goods and provision of exempted services. Accordingly, a show cause notice dated 04.10.2016 was issued alleging non-maintenance of separate accounts and proposed payment of duty as per Rule 6(3A) of the Cenvat Credit Rules, 2004. The amount was calculated to Rs. 16,58,000/- for the period from 2011-12 to 2014-15. It was also observed that vehicles did not qualify as capital goods for the purpose of Cenvat credit and therefore, credit av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a provider of output service, opting not to maintain separate records of the use of inputs and input services for the manufacture of dutiable and exempted goods or for providing taxable services and exempted services is liable to pay an amount equal to 5% of the value of the exempted goods or 6% of the value of the exempted services or a value as determined under Rule 6(3A) of the Rules. The said rule provides for a formula for calculating the amount attributable to input services used for manufacture of exempted goods or providing exempted services. A manufacturer of goods or provider of taxable services may use various input services in or in relation to the manufacture of dutiable and exempted goods or for the provision of exempted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994. I also observed that no service tax credit is reversible. The CBEC instructions No.96/85/2015-CX.I dated 07.12.2015, in paragraph B.26, it has been observed that there is no provision in the present Rule 3(5) and accordingly there is no such necessity of amending Rule 3(5) for incorporating reversal of credit taken on inputs services. The relevant portion of the CBEC instruction is reproduced below: "B.26 - Meerut Zone - CENVAT Credit- Reversal of Cenvat Credit in respect of Service Tax paid on input services: Issue: Rule 3(5) of the Cenvat Credit Rules, 2004 provides as under: "when inputs or capital goods, on which CENVAT credit has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the input services credit, when such input services cannot be reused, unlike inputs and capital goods which are available for reuse would not be fair to the trade. Therefore, the conference concluded that the present rule represents the correct provision in accordance with the principles of input tax credit. Rule 3(5) of the Cenvat Credit Rules, 2004, does not need any amendment. Audit para may be replied accordingly."
8. Accordingly, I hold that the appellant is not required to reverse the credit on input services that was taken along with duty paid on such inputs. The impugned order is set aside. The appeal filed by the appellant is allowed with consequential benefit, if any.
(Pronounced in the open court on 23.05.2018) H X X X X Extracts X X X X X X X X Extracts X X X X
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