2014 (1) TMI 252 - AT - Service Tax

Tribunal rules in favor of appellants on Cenvat credit appeal, overturning duty and penalty orders.

PROTECH GALVANIZERS & FABRICATORS PVT. LTD. Versus COMMR. OF C. EX., JAIPUR-I

The Tribunal ruled in favor of the appellants, holding that they were not obligated to reverse the Cenvat credit on paint taken from the factory to the ... Waiver of pre deposit - Availment of CENVAT Credit - Reverse charge mechanism - Applicability of sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004 - Held that:- inputs necessary for providing output service can be removed from the factory without reversing the credit taken on the inputs - appropriate provision in this case is sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004. There is no dispute that input in question was required for providing output service on which the appellants were paying Service Tax - Stay granted. Issues:1. Whether the appellants were required to reverse the Cenvat credit taken on paint removed from the factory to the site.2. Whether the impugned order confirming duty amount and penalty is justified.Analysis:Issue 1: The appellants, manufacturers of transmission towers, were paying excise duty on goods manufactured and Service Tax on erection and commissioning services. They were also providing a final coating of paint on the towers at the installation site. The Revenue contended that the Cenvat credit taken on paint removed from the factory to the site should be reversed. The Counsel for the appellant argued that there is no restriction on removing inputs needed for providing services from the factory premises, citing the proviso to sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004. The Tribunal found that the input in question was necessary for providing output services for which Service Tax was paid, and hence waived the pre-deposit of duty, ultimately deciding in favor of the appellants.Issue 2: The Revenue relied on sub-rule (5) of Rule 3 of Cenvat Credit Rules, which mandates the reversal of Cenvat credit when inputs are removed from the factory. However, the Tribunal considered the arguments from both sides and concluded that the provision in question does not apply in this case as the input was essential for providing output services on which Service Tax was paid. Therefore, the Tribunal found no merit in the Revenue's contention, waived the pre-deposit of duty, and allowed both the stay petition and appeal in favor of the appellants.In summary, the Tribunal decided in favor of the appellants, ruling that they were not required to reverse the Cenvat credit taken on the paint removed from the factory to the site. The impugned order confirming duty amount and penalty was set aside, and both the stay petition and appeal were allowed.