2022 (5) TMI 430 - AT - Service Tax

Dispute over tax credit availment, CENVAT rules, and retrospective effect of amendment. Appellant challenges liability calculation.

JWC Logistics Park Pvt Ltd Versus Commissioner of Central Excise & Service Tax, Raigad

The case involved disputes over the availment of tax credit on input services for output services, liability calculation under CENVAT Credit Rules, 2004, ... Quantum of reversal of CENVAT Credit - common input services for taxable as well as exempt services - input service procured in common for providing output service during 2013-14 and 2014-15 that was excluded from levy of tax and for providing cargo handling agency service on which liability was being duly discharged - HELD THAT:- The issue of the denominator to be adopted for computation of proportionate reversal of CENVAT credit has now been settled as also the retrospective applicability of the amended provision in several decisions and no justification is adduced for not following the said decisions. The impugned order has arrived at an incorrect computation. Accordingly, the computation is set aside and matter remanded back to the original authority for a fresh decision that is in consonance with law as judicially determined - Appeal allowed by way of remand. Issues:1. Availment of credit of tax paid on 'input service' for providing 'output service'.2. Controversy regarding the quantum of liability under rule 6(3)(ii) of CENVAT Credit Rules, 2004.3. Application of relevant formula under rule 6 of CENVAT Credit Rules, 2004.4. Interpretation of the retrospective effect of the amendment in April 2016.5. Computation of liability based on existing parameters at the time of becoming liable.Issue 1: Availment of credit of tax paid on 'input service' for providing 'output service':The appeal by M/s JWC Logistics Park Private Limited concerns the availment of credit of tax paid on 'input service' procured for providing 'output service' during 2013-14 and 2014-15. The appellant had not segregated consumption for accounting of three 'input services', resulting in a dispute over the quantum of liability, which was ultimately resolved by the appellant reversing credit of &8377;1,59,265. However, the tax authorities contended that the actual liability was &8377;15,26,965 under rule 6(3)(i) of CENVAT Credit Rules, 2004.Issue 2: Controversy regarding the quantum of liability under rule 6(3)(ii) of CENVAT Credit Rules, 2004:The dispute revolved around the application of the correct formula for determining the liability under rule 6 of CENVAT Credit Rules, 2004. The appellant argued that the authorities should not have concluded proceedings against them for adopting a different prescribed formula for reversal. They relied on precedents to support their contention that the application of an irrelevant formula should not be sustained.Issue 3: Application of relevant formula under rule 6 of CENVAT Credit Rules, 2004:The appellant contended that the amendment to rule 6(3A) of CENVAT Credit Rules, 2004 in April 2016 had retrospective effect and should be considered in determining the outcome of the dispute in their favor. They cited decisions by various Tribunals to support their argument that the total CENVAT credit for reversal should only include common input services and not services exclusively used for dutiable goods.Issue 4: Interpretation of the retrospective effect of the amendment in April 2016:The retrospective application of the amendment in April 2016 was a key point of contention. The appellant argued that the retrospective effect should be considered in their favor based on various Tribunal decisions and circulars clarifying the intent of the amendment to rule 6 of CENVAT Credit Rules, 2004.Issue 5: Computation of liability based on existing parameters at the time of becoming liable:The Authorized Representative countered the provision invoked for computing liability, arguing that the excluded portion should be computed based on the parameters existing when the liability arose, not on amended provisions. The issue of the denominator for computing the proportionate reversal of CENVAT credit was settled in previous decisions, and the impugned order was set aside for a fresh decision in line with judicial determinations.In conclusion, the judgment addressed the issues surrounding the availment of credit of tax paid on 'input service' for providing 'output service', the controversy over the quantum of liability, the application of the relevant formula under rule 6 of CENVAT Credit Rules, 2004, the interpretation of the retrospective effect of the amendment in April 2016, and the computation of liability based on existing parameters at the time of becoming liable. The matter was remanded back to the original authority for a fresh decision in accordance with the law as determined by previous judicial decisions.