2013 (11) TMI 104 - AT - Service Tax

Tribunal Grants Waiver for CENVAT Credit Demand

The Tribunal granted a waiver of the demand for CENVAT Credit along with interest and penalty, allowing the stay petition during the appeal process. The ... Cenvat Credit and Penalty u/s 15(3)/15(4) of the CC Rules, 2004 r.w. Section 78 of the Finance Act - manufacturing activity and providing Business Auxiliary Services – Whether the Applicant are entitled to utilize the Credit availed on inputs, capital goods and input services, while discharging their liability towards the service tax on Business Auxiliary Service – Waiver of Pre-deposit - Held that:- The applicants are having a common account and they have utilized the entire credit against the output services and have not utilised the credit for clearing manufactured products - As per provisions of Cenvat Credit Rules, no where it is specified that if an assessee is engaged in both activities i.e. manufacturing and providing services, the assessee has to maintain separate cenvat credit account of input/output service – Relying upon CCE, Chandigarh vs. Nahar Industrial Enterprises Ltd. [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] - Prima facie, the availing of credit or its utilization cannot be denied - the applicants have made out a strong case in their favour – the entire demand of cenvat credit along with interest and penalty granted – Stay granted. Issues: Application seeking waiver of CENVAT Credit and penalty under CENVAT Credit Rules, 2004 read with Section 78 of the Finance Act, 1994.Analysis:1. The main issue in this case is whether the Applicant is entitled to utilize the CENVAT Credit availed on inputs, capital goods, and input services while discharging their service tax liability on Business Auxiliary Service.2. The Applicant claimed that they utilized the CENVAT Credit towards their service tax liability based on the CBEC Manual, which states there is no restriction on using the credit for excise duty or service tax. They also cited the judgment in the case of Instrumentation Ltd. vs. CCE, Jaipur and the judgment of the Punjab & Haryana High Court in the case of CCE, Chandigarh vs. Nahar Industrial Enterprises Ltd. to support their argument.3. On the other hand, the Revenue argued that the Applicant must first establish their eligibility for the Credit by showing a nexus between the inputs, capital goods, and input services used and the manufacture of dutiable goods or output service. The Revenue contended that the Applicant failed to demonstrate this nexus, making them ineligible for the Credit.4. The Tribunal examined the contentions of both sides and found that the Applicant maintained a common pool account for availing CENVAT Credit against inputs, capital goods, and input services. The Revenue contended that the credit availed on inputs and capital goods could not be used to discharge the service tax liability. However, the Tribunal referred to a previous judgment in the case of Instrumentation Ltd. and observed that there is no requirement for separate credit accounts for manufacturing and service activities. Based on this precedent, the Tribunal granted a waiver of the demand for CENVAT Credit along with interest and penalty, allowing the stay petition during the appeal process.