TaxTMI 
TaxTMI 
2024 (2) TMI 966
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....ellants herein is engaged in providing taxable services such as Works Contract service, Business Auxiliary Service, Maintenance or Repair Service, Mining service etc. under various sub-clauses of Section 65 (105) of the Finance Act, 1994 (for the period prior to 01.07.2012) and under Section 65B(51) ibid, subsequent to the introduction of negative list regime, for which they were registered with the Service Tax Department and were filing periodical returns. Apart from providing the taxable services, the appellants are also providing exempted services such as construction of public roads, Bridges, services by way of access to roads on payment of toll charges etc., and trading of goods. The appellants were availing Cenvat credit on inputs, capital goods and inputs services under Cenvat Credit Rules, 2004. 2.2 During the course of audit of the records of the appellants it was observed by the Department that the appellants were availing Cenvat credit of service tax paid on input services which were used by them for provision of taxable output services as well as exempted output services, and it was claimed by the department that no separate records regarding receipt and utilisation ....
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....er Rule 15(3) ibid read with Section 78 of the Finance Act, 1994. Being aggrieved by the aforesaid impugned orders, the appellants have filed these appeals before this Tribunal. 3.1 Learned Advocate for the Appellants had submitted that the appellants were providing both taxable and exempt services. The taxable services provided by the appellants constitute (i) Works Contract Services (ii) Business Auxiliary Services (iii) Maintenance or Repair Services, and (iv) Mining Services; whereas, the exempt services provided by the appellants are (i) construction of public roads (ii) construction of bridges (iii) services by way of access to roads on payment of toll charges, and (iv) trading of goods. He further submitted that in relation to input services which were received and utilised solely for exempt services, the appellants did not claim/avail Cenvat credit at all, and this position is not contentious. Further, in relation to input services that were received and utilised solely for taxable services, the appellants had availed Cenvat credit. As regards, common input services used for both taxable and exempt services, the appellants have segregated the same by apportioning to vari....
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.... are unsustainable and bad in law. In view of the aforesaid submissions and on the basis of the additional written paper books, learned Advocate prayed that the appeals filed by the appellants may be allowed by setting aside the impugned orders. 4.1 Learned Authorised Representative (AR), appearing for the Revenue reiterated the findings in both the impugned orders, and stated that the invoices of the input services availed by the appellants are of three types, namely one with respect to (i) taxable site, second one with respect to (ii) nontaxable/ exempt sites and the other in respect of (iii) Head Office (HO); appellants have not provided any details of the sites which are termed as nontaxable/ exempt sites. From the above, he stated that the invoices with respect to input services in respect of HO definitely relate to consumption of services which are used both for provision of taxable services as well as exempt services. Thus learned AR claimed that the availment of Cenvat credit on common input services is illegal and the same has been correctly demanded in the impugned orders by the learned Commissioner. 4.2 Learned AR further submitted that the appellants has not follo....
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.....(N.T) dt. 20.06.2012 w.e.f. 01.07.2012 )[provider of taxable output] service. 6 . (1) The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services, except in the circumstances mentioned in sub-rule (2): (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for- (a) the receipt, consumption and inventory of inputs used- (i) in or in relation to the manufacture of exempted goods; (ii) in or in relation to the manufacture of dutiable final products excluding exempted goods; (iii) for the provision of exempted services; (iv) for the provision of output services excluding ....
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....mpted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services. Explanation III.-No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services." 8.1. As per above legal provisions, we find that Rule 6 of the Cenvat Credit Rules, 2004 deals with the obligations of a provider of taxable and exempted services. A plain reading of the above provisions indicate that while Rule 6(1) ibid provides that the manufacturer or provider of output service is not entitled for the credit of such quantity of input or input services which are used in the manufacture of exempted goods or exempted service except in the....
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....cation, the assessee would be entitled to both the benefits. ..." 8.3 Notification No.13/2016-C.E. (N.T.) dated 01.03.2006 was amended with effect from 01.04.2016, as a part of Union Budget proposals for the financial year 2016-17. It is pertinent to note that after the said amendment the only change that could be seen in respect of un-amended sub-rule (3) to Rule 6 ibid is to the extent of payment in respect of exempted goods produced or exempted services provided under Rule 6(1) which states that Cenvat Credit shall not be allowed on inputs/input services exclusively used for providing exempted services. The Ministry of Finance, Tax Research Unit of the CBEC in the instructions issued to the field formations vide D.O.F.No.334/8/2016-TRU dated 29.02.2016, had explained about the above amendment and it has been stated as follows: ...2) The CENVAT Credit Rules, 2004 are being amended, so as to improve credit flow, reduce the compliance burden and associated litigations, particularly those relating to apportionment of credit between exempted and non-exempted final products / services. Changes are also being made in the provisions relating to input service distributor, inc....
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....ll apply on or after the 1st April, 2020; 13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a road, bridge, tunnel, or terminal for road transportation for use by general public; (b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Aawas Yojana; (ba) a civil structure or any other original works pertaining to the 'In-situ rehabilitation of existing slum dwellers using land as a resource through private participation‟ under the Housing for All (Urban) Mission/Pradhan Mantri Aawas Yojana, only for existing slum dwellers." (bb) a civil structure or any other original works pertaining to the Beneficiary led individual house construction / enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Aawas Yojana;"; ... We also find from the records that the appellants have provided for various periods the list of projects/sites/contracts which are taxable services and exempt services besides the trading activity and the month-wise....
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.... rival contentions, that the appellants claim that they have maintained separate records; they have not availed credit on common inputs or services; Rule 6 is applicable only in the case where the Appellants had availed Cenvat credit on the inputs and input services pertaining to the exempted and dutiable goods/services; Rule 6(3) is not applicable to the present case; demand of duty at the rate of 5% or 6% was incorrect; they had made reversal of this availed Cenvat credit of the common inputs and/or services, used in the manufacture of both dutiable and the exempted excisable goods; reversal of Cenvat credit would mean non-availment of such credit in the ratio of the decision of the Supreme Court in Bombay Dyeing & Manufacturing Company, 2007 (8) SCC 177 and the decision of the Bombay High Court in Steelco Gujarat Limited, 2012 (285) ELT 161. These decisions enunciated the proposition that reversal, made prior to its utilization, would mean non-availment of such credit; Rule 6(3)(1) of the Cenvat Credit Rules, 2004 would come into play only when a manufacturer did not wish to comply with Rule 6(1) thereof by not making reversal of the availed Cenvat credit. 23. Ongoing t....
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.... authority has not gone into the submissions and has simply brushed aside the arguments of the appellant saying that understandably, the raw material used is common. We find that the Department has not taken any steps to negate the claims of the respective appellants. No Panchnama indicating the process of manufacture has been drawn, in the least, leave alone obtaining any technical opinion to support or to contradict the submissions of the appellants. The only averment of the learned adjudicating authority appears to be that the input services are understandably, used in the manufacture of dutiable as well as exempted goods. However, we find that no basis for such understanding has been given with cogent reasons. We find that it is not open to the Department to brush aside the submissions of the appellants without a proper enquiry and reason. In the absence of a systematic study and negation of the appellant's submissions, the findings of the learned adjudicating authority are not legally tenable. 25. Moreover, we find that the appellants have submitted Chartered Accountant's certificates. The learned adjudicating authority held that the Chartered Accountant's certificate....
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....the appellants reversed the credit demands do not survive. 27. We further find that the learned adjudicating authority mainly relies on the averments that the appellants did not disprove the allegation made in the showcause notice. As discussed above, it is a matter of record that the appellants have given elaborate submissions in response to Audit reports and also during the adjudication proceedings, it is apparent that the learned adjudicating authority has not gone into the submissions in detail and has not negated the assertions made by the appellant in a reasoned manner. It is to be noted that it is the Department who are alleging certain non-observance, of procedures by the appellants and availment of CENVAT Credit in a proper manner, on the part of the appellants. Therefore, it was incumbent upon the Department to prove the same with cogent evidence, reasoned argument and on a legal basis. Having not discharged their onus, the Department cannot simply brush aside the submissions of the appellants. We find that on this count too the show-cause notices and the adjudication orders are not sustainable. Accordingly, we find that the demands raised therein are not sustain....
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....e original authorities. It has also been held in the said appellate orders that furnishing of such voluminous details can only be possible only when the records are maintained separately, and the finding of lower authority that the appellant did not maintain separate account of the taxable services as well as exempted services was also not sustained. As these records of the appellants are same and refer to the same disputed period in the two impugned orders in the case before us, we find that it clearly emerges that learned Commissioner had not gone into the details of records submitted by the appellants and had confirmed the adjudged demands without proper examination of the facts. 9.2 We also find that on this issue, the Hon'ble Supreme Court in the case of Chandrapur Magnet Wires (P) Limited (supra) had held that in case where an assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final product that are exempted, and subsequently makes a debit entry in respect of exempt final product, then this debit entry would make such credit entry stand deleted in the accounts of the assessee, maintaining that in effect no Cenvat credit was taken i....
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....ot entitled to remove the copper wires without payment of duty since credit of the duty paid on the inputs used in the manufacture of copper wire had already been taken in accordance with Rule 57A. Once appropriate entries have been made in the register, there is no rule under which the process could be reversed. Since the credit has been taken for the duty paid on the inputs in the ledger maintained by the assessees, the assessee cannot be heard to say that no credit of the duty has been taken by it under Rule 57A. 6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under....
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....t delivered by the Hon'ble Supreme Court, it cannot be said that the appellants had incorrectly availed and utilised CENVAT credit, inasmuch as the appellants had not taken Cenvat credit in respect of exempt projects/services and had also reversed the Cenvat credit in respect of common input services, duly informing the department with complete details. Further, in view of the above judgement of the Hon'ble Apex Court, it could be concluded that the reversal of Cenvat credit in respect of common input services by the appellants is sufficient for compliance with the Cenvat Credit Rules, 2004. 9.4 We further find that the Co-ordinate Bench of the Tribunal in the case of Hamdard (Wakf) Laboratories (Supra) had held in clear terms that the appellants cannot be forced to avail the option of payment of prescribed percentage of the value of exempted services in terms of Rule 6(3) ibid. The relevant paragraph of the said order is extracted below: "32. The next issue is whether the appellant can be compelled to choose one of the options under Rule 6 of Cenvat Credit Rules, 2004. The High Court of Telangana and Andhra Pradesh in the case of Tiara Advertising (supra) explained the....