2015 (12) TMI 1305 - AT - Central Excise

Tribunal allows appeal for separate CENVAT credit roles, overturns denial based on common ownership.

M/s Megha Engineering & Infrastructure Ltd. Versus Commissioner of Central Excise, Customs And Service Tax Hyderabad-II

The Tribunal allowed the appeal, ruling in favor of the appellant. It held that the appellant's distinct roles as a manufacturer and service provider, ... Denial of cenvat credit to manufacturing activity on the ground that assessee is availing the benefit of composition scheme under works contract to pay service tax - Revenue was of the view that inasmuch as the manufacturing unit of the appellant and the service providing unit of the appellant is one and the same, the manufacturing unit having availed the credit of duty paid on the steel plates used in the manufacture of pipes, which stand utilized by them for payment of excise duty on the pipes, would amount to as if the service providing unit has availed the CENVAT credit. Held that:- No objection was ever raised by the Revenues at the time of collection of duty of excise from their manufacturing unit located at Gowdavalli. It is only when the service provider located at an altogether different unit opted for composition scheme, the Revenue's objection in respect of their manufacturing unit at Gowdavalli was raised. Both the roles of the assessee are separately defined roles covered by different fields of law. i.e. one by the excise law and the other by the service tax law. Mixing up of the two cannot be appreciated. There is no prohibition under the law for one person to be a manufacturer as also a service provider. The activity of providing service starts from procurement of pipes, where the activity of manufacture of pipes ends. As such we find no justifiable and valid reasons to deny the CENVAT credit of duty paid on the inputs used in the manufacture of pipes manufactured by the appellant as a manufacturer. Accordingly, the impugned order is set aside - Decided in favour of assessee. Issues:1. Availing CENVAT credit on duty paid on inputs for manufacturing MS Pipes.2. Payment of service tax under composition scheme for works contract services.3. Interpretation of Rule 3 of Works contract (Composition Scheme for payment of Service Tax) Rules 2007.4. Dispute regarding availing CENVAT credit for service provider wing.5. Denial of CENVAT credit by Revenue due to common ownership of manufacturing and service providing units.Analysis:1. The appellant, engaged in manufacturing MS Pipes, availed CENVAT credit on duty paid on inputs procured for pipe manufacturing. They cleared pipes on payment of excise duty and reversed credit for exempted pipes used in Govt projects.2. The appellant, also a service provider for works contracts, opted for composition schemes for service tax payment. They did not avail CENVAT credit for service provision.3. Dispute arose on Rule 3 of Works contract Rules 2007, requiring payment as per composition scheme without availing CENVAT credit on inputs for works contract services.4. Revenue contended that common ownership of manufacturing and service units disallowed CENVAT credit for service provider wing. Show cause notice issued for irregularly availed credit.5. Adjudicating authority held both wings as one entity, disallowing CENVAT credit for service provision. Appellant argued separate roles and non-contravention of laws.Judgment:The Tribunal noted the appellant's distinct roles as a manufacturer and service provider, each with separate registrations. Appellant availed CENVAT credit for manufacturing and did not for service provision, complying with Rule 3(2). The denial of credit was unjustified as both roles were legally distinct. Revenue's objection based on common ownership was unfounded. The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellants in all three appeals. The judgment emphasized the separate legal frameworks governing manufacturing and service provision, rejecting the Revenue's contention of mixing the two roles.