TaxTMI 
TaxTMI 
2024 (2) TMI 966
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....axable 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 of these common services were maintained b....
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....he 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 various projects and the head office. These common....
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....issions 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 followed the procedure prescribed under Rule 6(3A) of the Central Credit ....
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....redit 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 exempted services; and (b) the receipt and use of input services- (i) in or in relation to the manufacture of exempted goods and their cle....
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....s 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 circumstances mentioned in the sub-rule (2) of the said Rules. Sub-rule (2) of Rule 6 ibid provides for maintenance of separate records in respect of inputs, input services substantiating use of input and input services for taxable and exem....
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....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, including extension of this facility to transfer input services credit to outsourced manufacturers, under certain circumstances. The amendments in these Rules will also enable manufacturers with multiple manufacturing units to maintain a common warehouse for in....
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....eral 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 Cenvat credit involved in input services vide their letter 24.02.2014 addressed to the department in replying to the audit objections raised in this regard. To illustrate, in respect of Cenvat credit relating to the period from April, 2011 to September, 2011, the appellants had given a list of 31 projects, out of whi....
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....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 through the averments of the appellants and the case law cited and paraphrased as above, we find, in the light of judicial pronouncements it is clear that (i). Rule 6 lays down the obligations of the manufacturer of dutiable and exempted goods and provider of taxable, and exempted services; Rule 6 (1) and (2) Provide for different....
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....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 certificates are not acceptable without giving any reasons thereof. On the contrary, the claim of the appellants and the reversal thereof, as mentioned in the certificates, was taken to be ample proof that the appellants have availed cenvat credit of common inputs. It is not a case of the Department that the said Chartered Accountant has been examined. Learned Commissioner was within his ri....
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....cation 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 sustainable and once the demands are held to be not sustainable, penalties imposed are also not sustainable. The same need to be set aside along with demand. We find that the appellants have reversed the credit attributable to the inputs or inputs services alleged to have been used in the manufacture of exempted goods. In view of the settled position of law, we find that reversal of CENVAT Credit a....
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....e 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 in respect of exempt final products. The relevant paragraphs of the said judgement of the Hon'ble Apex Court is extracted below: "3. The case of the appellants is that if a manufacturer clears various final products utilising duty paid inputs, according to Central Excise Rules, he was entitled to the benefit of MODVAT scheme and was entitled to get credit for the duty of excise paid on the inp....
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....sessee 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 :- "3. The credit account under MODVAT rules may be maintained chapter wise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, ....