2008 (2) TMI 90 - AT - Service Tax

Tribunal Upholds Decision on Cenvat Credit Rules Interpretation

The Tribunal upheld the Commissioner (Appeals)'s decision in a case involving the interpretation of Cenvat Credit Rules 6 (3) and 6 (5). The Tribunal ... Cenvat Credit Rules 6 (3) & 6 (5) – non maintenance of separate records of input services used for exempted & non-exempted services – revenue seeks to deny credit on the ground that the provisions of Rule 6 (3) (c) will be applicable – Rule 6(3) is not applicable to Rule 6(5) because Rule 6(5) stars with non-obstante clause ‘notwithstanding’ – it is undisputed that credit availed is on the service as mentioned in Rule 6(5), the credit of the entire/whole amount of service tax has to be allowed Issues: Revenue's appeal against order-in-appeal; Interpretation of Cenvat Credit Rules 6 (3) and 6 (5); Maintaining separate records for credit utilization; Eligibility and utilization of service tax credit under Rule 6 (5).In this case, the Revenue filed an appeal against the order-in-appeal dated 12/09/2007. The main issue revolved around the interpretation of Cenvat Credit Rules 6 (3) and 6 (5). The Revenue contended that the respondent had not maintained separate records for the utilization of service tax credit for exempted and non-exempted services, invoking Rule 6 (3) (c) to limit credit utilization to 20%. On the other hand, the respondent argued that the Commissioner (Appeals) correctly interpreted the law, emphasizing that the credit for services availed under Rule 6 (5) was not disputed by the Revenue.The Revenue sought to deny credit to the respondent due to the alleged non-maintenance of separate books of accounts for credit utilization. However, the Commissioner (Appeals) noted that the credit taken by the respondent pertained to services covered under Rule 6 (5), not Rule 6 (3). The Commissioner highlighted the significance of the term 'notwithstanding' in Rule 6 (5), indicating that Rule 6 (3) was not applicable to services covered under Rule 6 (5). The Commissioner emphasized that the credit of the whole service tax paid on such services must be allowed unless exclusively used for exempted goods.The Commissioner's analysis revealed that once the credit was fully allowed under Rule 6 (5), arguments based on Rule 6 (3) fell flat. The Commissioner clarified that Rule 6 (5) did not distinguish between taking and utilization of credit, indicating that if eligible credit was taken, it should be allowed for utilization as well. The Commissioner emphasized that disallowing credit utilization would contradict the legislative intent of the Cenvat Credit Rules 2004.Ultimately, the Tribunal upheld the Commissioner (Appeals)'s decision, finding it correct and devoid of any infirmity. The Tribunal rejected the Revenue's appeal, emphasizing the importance of allowing the service tax credit on services covered under Rule 6 (5) without restricting its utilization, in line with the provisions of the Cenvat Credit Rules 2004.