2009 (7) TMI 608 - AT - Service Tax

Appellate Tribunal Upholds Cenvat Credit on GTA Services for Manufacturing Iron & Steel Castings

The Appellate Tribunal CESTAT, New Delhi, rejected the revenue's appeal in a 2009 case concerning Cenvat credit on services tax paid on goods ... Cenvat credit on input services - exclusive use in or in relation to the manufacture of exempted goods - reversal of credit on removal of inputs as such - rule 6(5) of the Cenvat Credit Rules, 2004 - rule 3(5) of the Cenvat Credit Rules, 2004 - recovery of Cenvat credit availed or utilised wronglyCenvat credit on input services - exclusive use in or in relation to the manufacture of exempted goods - rule 6(5) of the Cenvat Credit Rules, 2004 - Admissibility of Cenvat credit of Service Tax on GTA for transportation of raw materials used both in the manufacture of dutiable and exempted goods - HELD THAT: - The Tribunal accepted the Commissioner (Appeals) finding that sub-rule (5) of rule 6 permits denial of credit only where the service is used exclusively in or in relation to manufacture of exempted goods. The respondents established that the GTA services were not used exclusively for exempted goods but were availed for manufacture of both dutiable and exempted products. In those circumstances the statutory test for denial under rule 6(5) is not satisfied and credit cannot be denied. The Tribunal therefore upheld the appellate authority's conclusion that the Cenvat credit of service tax on GTA in respect of the transportation of raw materials was admissible. [Paras 4]Credit of service tax on GTA for transport of raw materials used for both dutiable and exempted goods is admissible since the services were not used exclusively for exempted goods.Reversal of credit on removal of inputs as such - rule 3(5) of the Cenvat Credit Rules, 2004 - recovery of Cenvat credit availed or utilised wrongly - Whether Cenvat credit of Service Tax on input-services (GTA) must be reversed when inputs are subsequently removed as such from the factory - HELD THAT: - The Tribunal, following the decision in Chitrakoot Steel & Power (P.) Ltd., observed that the statutory provision which mandates recovery on removal of inputs or capital goods (sub-rule (5) of rule 3) relates to credit on inputs or capital goods themselves and does not provide for reversal of credit availed on input-services when such inputs are removed as such. Rule 14 dealing with recovery of wrongly availed credit was not attracted as the credit had been correctly taken in terms of the Rules. Consequently there is no statutory requirement to reverse service-tax credit on GTA merely because inputs were later removed as such. [Paras 5]No requirement to reverse Cenvat credit of service tax on input-services upon removal of inputs as such; the demand for recovery on that ground is unsustainable.Final Conclusion: The Tribunal dismissed the revenue's appeal, upholding the Commissioner (Appeals): (i) Cenvat credit of service tax on GTA is admissible where the service was not used exclusively for manufacture of exempted goods; and (ii) there is no statutory provision requiring reversal of credit on input-services when inputs are removed as such. The Appellate Tribunal CESTAT, New Delhi, delivered a judgement in 2009 denying Cenvat credit on services tax paid on goods transportation agency (GTA) services used in the manufacturing of iron and steel castings. The Commissioner (Appeals) set aside the denial of credit, leading the revenue to file an appeal. The revenue argued that Cenvat credit should not be allowed on inputs used in the manufacture of exempted goods, and that the respondents should reverse credit of service tax on GTA on removal of inputs as such. The respondents contended that the taxable service was not used exclusively in the manufacture of exempted goods. The Tribunal supported the findings of the Commissioner (Appeals) and referenced a previous decision to conclude that there is no provision for reversing credit of service tax on input services when inputs are removed from the factory. Ultimately, the appeal filed by the revenue was rejected by the Tribunal. The judgement highlights the importance of understanding the specific rules and regulations governing Cenvat credit and input services to determine eligibility for tax credits.