2014 (11) TMI 113 - AT - Central Excise

Appellant denied CENVAT Credit for pre-2004 service tax, court upholds decision.

M/s Elecon Engineering Co. Ltd. Versus CCE Vadodara-I

The appellant was found ineligible to claim CENVAT Credit for Service Tax paid by a commission agent on goods cleared before 10.09.2004. The court upheld ... Benefit of CENVAT Credit Rules, 2004 - Whether the appellant is eligible to avail CENVAT Credit of the Service Tax paid by the commission agent on the goods which were cleared prior to 10.09.2004 - Held that:- payment of Service Tax liability was in respect of the goods which were cleared and exported prior to 10.09.2004. The findings of the first appellate authority are correct to that extent as the services rendered by commission agent were completed prior to 10.09.2004. The invoices raised by the commission agent in January 2005 and March 2005 may not carry any further the case of the appellant as no services were rendered after 10.09.2004 in respect of those invoices. - demand with interest confirmed - penalty waived - Decided partly in favour of assssee. Issues:- Eligibility of appellant to avail CENVAT Credit of Service Tax paid by commission agent on goods cleared prior to 10.09.2004.Analysis:1. The appeal challenged an Order-in-Appeal regarding the appellant's eligibility to avail CENVAT Credit under the CENVAT Credit Rules, 2004. The appellant sold finished goods to a commission agent who paid Service Tax under Business Auxiliary Service category for a specific period. The appellant claimed CENVAT Credit for this tax paid, which was disputed by the authorities.2. The appellant argued that since they paid Service Tax to the commission agent, they were entitled to avail CENVAT Credit, citing relevant case laws. The Department contended that the CENVAT Credit availed was for services rendered before an amendment to Rule 3(1) of the CENVAT Credit Rules, 2004, and thus not permissible.3. The main issue was whether the appellant could claim CENVAT Credit for Service Tax paid by the commission agent on goods cleared before 10.09.2004. The authorities found that the appellant was not eligible for such credit as the services were rendered prior to the specified date, even though invoices indicating Service Tax payment were issued later.4. The Order-in-Appeal clarified that under the CENVAT Credit Rules, 2004, a manufacturer could only avail credit for Service Tax paid on input services received on or after 10.09.2004. Since the services in question were received before this date, the appellant was not entitled to CENVAT Credit, irrespective of when the invoices were raised.5. The judgment upheld the findings of the first appellate authority, confirming the demand for CENVAT Credit and rejecting the penalties imposed on the appellant. It emphasized the clear provisions of Rule 3 of the CENVAT Credit Rules, 2004, regarding eligibility to claim credit for services rendered to a manufacturer or output service provider.6. Ultimately, the appeal was disposed of with the appellant being held liable for the demand of CENVAT Credit but not for the penalties. The judgment highlighted the need for a correct interpretation of tax rules and acknowledged the potential for confusion in such matters, leading to the setting aside of penalties.