Appellant's Reversal of CENVAT Credit on Input Services Deemed Compliant The Tribunal held that the appellant, who had reversed the entire CENVAT credit on common input services, was compliant with the rule requiring reversal ...
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Appellant's Reversal of CENVAT Credit on Input Services Deemed Compliant
The Tribunal held that the appellant, who had reversed the entire CENVAT credit on common input services, was compliant with the rule requiring reversal of credit attributable to exempted services. As a result, the Tribunal set aside the previous order, allowing the appeal in favor of the appellant.
Issues: Whether appellant is required to reverse/pay an amount equivalent to 5% or 6% of the value of exempted services due to availing CENVAT credit on input services during 2010-11 and 2011-12.
Analysis: The appeal was against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur. The main issue was whether the appellant needed to reverse/pay an amount equivalent to a percentage of the value of exempted services due to availing CENVAT credit on input services during 2010-11 and 2011-12. The appellant argued that they had already reversed the entire CENVAT credit availed on common input services, which, according to them, was as good as non-availment of the credit. They cited the Supreme Court judgment in Chandrapur Magnet Wires (P) Ltd v. Collector of Central Excise, Nagpur [1996 (81) ELT 3 (SC)] to support their claim that they were not required to pay the amount equivalent to 5% or 6% of the exempted service value.
The Tribunal found that there was no dispute that the appellant had indeed reversed the entire credit of the common input services availed during the period in question. This action effectively amounted to non-availment of the CENVAT credit itself. Additionally, the Tribunal considered the provisions of rule 6(3A) of CENVAT Credit Rules, 2004, which require an assessee to reverse the credit attributable to exempted services proportionately. Applying this rule, the Tribunal concluded that the appellant only needed to reverse the CENVAT credit on common input services attributable to the trading activity. Since the appellant had already reversed the entire CENVAT credit on common input services, they were in compliance with the rule.
Therefore, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal in favor of the appellant. The restoration application was allowed, and the appeal was taken up for disposal, ultimately resulting in the appeal being allowed.
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