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TMI Blog2018 (9) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Appellant : Mr. Ranjit Mehta, Advocate For the Respondent : Dr. J. Harish, Deputy Commissioner (AR) ORDER PER: P. ANJANI KUMAR M/s. Trans Asian Shipping Services Pvt. Ltd., the appellants are engaged in providing various services chargeable to service tax. On verification of records maintained by the appellants, Revenue found that the appellants are discharging both taxable and exempted services; the appellants availed CENVAT credit on various input services used by them in providing both taxable and exempted services; utilized the full amount of credit for payment of service tax on taxable services. 2. The Department contended that the appellants have violated the conditions of sub-rule (1) of Rule 6 of CENVAT Credit Rules which provides that CENVAT credit shall not be allowed on such quantity of inputs service which is used in the provision of exempted services except in the circumstances mentioned in Rule 6(2). As per Rule 6(2), the provider of output service avails CENVAT credit in respect of any input service and provides such output services which are chargeable to tax as well as exempted services. The provider of output service shall maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed; (b) the taxes paid on input services specified in Rule 6(5) of CENVAT Credit Rules, for which full credit is availed; (c) taxes paid on input services utilized for providing both taxable as well as exempted services, for which the credit availed is arrived on a proportionate basis i.e., ratio of the taxable turnover to the total turnover from exempted as well as taxable services. Further, no tax credit is availed in relation to the input services that are utilized for provision of exempted services and the same are written off/expensed to the Profit and Loss Account of the applicant. There being maintenance of separate accounts in respect of receipt and consumption of input services used by the appellant in the rendition of taxable and exempted services, a declaration to this effect has also been made by the appellant in the ST-3 returns filed for the respective periods. The learned Commissioner failed to appreciate that the CENVAT Credit Rules do not prescribe the exact manner/nature in which separate accounts are required to be maintained. They have relied upon the following cases: Esab India Ltd. vs. CCE, Kolkata: 2009 (243) ELT 429 (Tri.-Kol.) Hindustan Eng. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to write off the non-eligible credit. 4.2 As per the guidelines, on receipt of an invoice (where service tax charged therein), the service division was to be identified and thereafter, the extent to which credit may be taken or not taken was to be determined; in case credit is ineligible, it was to be charged to Profit and Loss Account. Service tax credit that cannot be taken was required to be expensed off in the books of accounts; details of invoices that have been charged for CENVAT credit were to be maintained in an excel file and list of eligible direct and indirect and non-eligible credit was to be maintained. Primary accounts are maintained at branches, the eligible credit should be taken in the service tax account. This should be bifurcated on the basis where the same is direct or indirect; the balances should periodically be transferred to the Head Office. All ineligible credit should be expensed off to the Profit and Loss account. The counsel submitted that in view of the above, it is seen that elaborate method of accounting has been fixed and followed till the branch level. 4.3 The counsel for the appellants has submitted that they have produced before the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.6 The appellant has submitted an extract containing the details of credit availed, reversed by him and submitted that the impugned order may be set aside. 5. The learned DR has reiterated the findings of OIOs and the grounds of appeal in respect of appeal No.ST/21676/2014. 6. We have heard both sides and perused the records. On going through the records of the case, it is seen that the learned Commissioner has not appreciated the evidence put forth by the appellant regarding the maintenance of separate accounts. In is on record that in respect of each of the appeals, the appellants have produced a Chartered Accountant certificate which certifies the maintenance of accounts by the appellants. It is also on record that in respect of appeal No.ST/21676/2014 (wherein the Department is in appeal), the learned Commissioner has caused the verification report by the Range Officer and has come to the conclusion on the basis of the report that the appellants are maintaining separate records. 6.1 As submitted by the learned counsel for the appellants, we find that the appellants have issued guidelines for their internal accounting purposes regarding the credit to be availed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have been made in the register, there is no rule under which the process could be reversed. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. But, the Court s attention was drawn to the departmental circular according to which in a case where the manufacturer produces dutiable final products and also final goods which are exempt from duty and it is not reasonably possible to segregate inputs utilised in manufacture of the dutiable final products from the final products which are exempt from duty. Based on this, the Court held that the manufacturer may take credit of duty paid on all the inputs used in the manu-facture of final products on which duty will have to be paid and in view of this clarification by the Department, the Court saw no reason that why the assessee should not make a debit entry in the credit account before removal of the exempted final product and hence, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. The Court, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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