Availment of CENVAT Credit doesn’t depend on location of service provider

C.C.E. & S.T.-Daman Vs Ags Transact Technologies Ltd (CESTAT Ahmedabad)

CESTAT Ahmedabad held that location from where the service is provided is immaterial for availing the Cenvat credit on input services.

Facts- The respondent are engaged in the manufacture of Automatic Teller Machines (ATMs), other office Machines, Pumps of Liquids, Printing Machinery etc., falling under Chapter 84 of Central Excise Tariff Act 1985 and availing the benefits under the CENVAT Credit Rules, 2004.

It was noticed by the revenue that there was a sudden spurt in the availment of Cenvat Credit by the respondent particularly in reference to credit of service tax claimed to be input service. Discreet enquiry revealed that no such input services was received in their factory premises during the said month or even prior to the said month.

Further from the detailed enquiry it was observed that the respondent were availing Cenvat Credit on capital goods but no such ‘capital goods’ were received by them in their Daman Factory; also that the input services in respect of which Cenvat Credit was availed and utilized by the respondent did not have any nexus, directly or indirectly with the excisable goods manufactured by the respondent at their Daman unit.

It was also appeared that respondent had availed cenvat credit of various other services however, the services did not had any nexus with the manufacturing of the excisable goods at their Daman Plant; hence the credit of which was not available to them.

Accordingly, a show cause notice was issued to the respondent for the period, whereby it was proposed to deny the credit and recover the same along with interest and penalty. Adjudicating authority has dropped proceedings initiated against the respondent vide above show cause notices. Being aggrieved by the said impugned order the revenue filed the present appeal.

Conclusion- Held that it is a settled position that for availing the Cenvat credit the location from where the output service provided is not relevant. As long the service is provided by the service provider for which any input service is received and used for providing output service, the Cenvat credit on such input services shall be available and also for utilizing the said Cenvat credit for payment of service tax on the output service. Therefore, the location from where the service is provided and received is immaterial for availing the Cenvat credit on input services as well as for payment of service tax on the output services.

Further we observed that, the definition of “input service” is vider defined in Rule 2(l), and it would mean any service used by a provider of taxable service for providing an output service or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal. We also agree with argument of respondent that there is no restriction in Rule 2(l) of Cenvat Credit Rules, 2004 in respect of the input service to be received and utilized only in the factory or premises of the output service provider. Thus, for the above reasons, we find that the Ld. Commissioner rightly allowed the Cenvat credit to the respondent in the present matter.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

Brief facts of the case are that the respondent are engaged in the manufacture of Automatic Teller Machines (ATMs), other office Machines, Pumps of Liquids, Printing Machinery etc., falling under Chapter 84 of Central Excise Tariff Act 1985 and availing the benefits under the CENVAT Credit Rules, 2004. On scrutiny of the ER-1 return filed by the respondent for the month of March 2014, it was noticed by the revenue that there was a sudden spurt in the availment of Cenvat Credit by the respondent particularly in reference to credit of service tax claimed to be input service. Discreet enquiry revealed that no such input services was received in their factory premises during the said month or even prior to the said month. Further from the detailed enquiry conducted by the Jurisdictional Range Superintendent with the respondent, statement dated 05.02.2015 of Shri Dipesh Pravinchandra Shah, General Manager (Production) of the respondent, and scrutiny of the documents submitted by them, it was observed that the respondent were availing Cenvat Credit on capital goods but no such ^„capital goods‟ were received by them in their Daman Factory; also that the input services in respect of which Cenvat Credit was availed and utilized by the respondent during the period from March 2014 to December 2014 did not have any nexus, directly or indirectly with the excisable goods manufactured by the respondent at their Daman unit. According to the respondent, they were engaged in the manufacturing of ATM, Colour Dispenser Machines, POS-Point of Sales Machine, Inkjet Engravers Machines and Cash Shorting Machines at their Daman plant for which they have used services such as GTA, Security Services, Telephone Bill, Housekeeping. Whereas, it appeared that respondent during the relevant period has also availed credit of services tax for the services related to ATM Operation, Maintenance & Management Services, Security Services, Annual Maintenance charges, all of which were utilized at their depots/ Regional office/ Corporate Office/ Head Office/ Warehouse etc., and all their services were in relation to maintenance and management services of ATM machines installed at various other locations. Further, they have availed input service credit pertain to the services like Bank Charges, Courier services, GTA , Transaction charges, Legal charges, Work Contract Service, IT software service etc. which did not have any nexus with the manufacturing of the excisable goods at their Daman Plant; hence the credit of which was not available to them.

1.2 It also appeared that the respondent being a manufacturer of excisable goods, was registered with Central Excise Department and filing the ER-1 return in respect of their Daman Factory with Daman Authorities, that Head office of the respondent being Centrally registered at Mumbai as service provider for various locations across the Country was filing ST-3 returns with Mumbai authorities. While the credit of the duties paid on the goods and tax paid on the input services consumed by them at their different service locations all over the India were admissible to them as provider of output service subject to the conditions thereof and the same was to be reflected by them in their ST-3 returns, however, in respect of their manufacturing unit, the credit of the duties paid on the goods and tax on the services consumed in or in relation to the manufacturing activity alone was admissible to be reflected in their ER-1 return. Accordingly, a show cause notice dated 19.03.2015 was issued to the respondent for the period from March 2014 to December 2014, whereby it was proposed to deny the credit of Rs. 45,49,89,955/- and recover the same along with interest and penalty. Further, another show cause notice dated 02.02.2016 for the subsequent period from January 2015 to November 2015 was also issued to them demanding the wrongly availed Cenvat Credit of Rs, 67,40,11,629/- along with interest and penalty.

1.3 Both the show cause notices have been decided by the impugned Common Order-In-Original dated 07.09.2018. Learned Adjudicating authority has dropped the proceedings initiated against the respondent vide above show cause notices. Being aggrieved by the said impugned order the revenue filed the present appeal.

2. Shri Ajay Jain, Special Counsel, appearing on behalf of the revenue reiterated the grounds of appeal and submits that the Commissioner has erred in dropping the demands for recovery of Cenvat Credit. The main ground in which Cenvat Credit of ^„Capital Goods’ & ^„Input Services’ is proposed to be denied in both the SCNs is due to the admitted facts that such credit did not have any nexus directly or indirectly with the excisable goods being manufactured by the respondent at their factory at Daman. Therefore, the Ld. Commissioner has clearly erred in arriving at the finding that the account and records maintained are not questioned nor is the eligibility to credit availed, which is clearly contrary to the facts recorded in the impugned order.

2.1 He also submits that it is admitted by the respondent themselves, that they were engaged in manufacture and clearances of excisable goods at their Daman Plant for which the input services were GTA, Security Services, Telephone Bills, House Keeping services only. Whereas the input service credit availed by the respondent during the relevant period under dispute, were in relation to ATM Operation, Maintenance & Management Service, Security Service, Annual Maintenance Charges, and such credit also related to services like Bank charges, courier charges, GTA, Legal charges, IT software service etc., which were not received at the respondent’s premises at Daman. These services were, in fact, received and utilized at the depots/ Regional office/ Corporate office/ Head Office and such other locations for which they were severally registered and holding centralized Service tax registration & were filing separate periodical ST-3 returns. Thus, these were the input services received in relation to provisions of output service of ATM Operation & Maintenance & Management Services and such other output services at various other locations all over the country, but not definitely utilized in or in relation to manufacture and removal of dutiable excisable goods from the factory premises at Daman.

2.2 He further submits that Ld. Commissioner has travelled beyond the scope of subject show cause notices to take-up and first decide the issue of amendment of Centralized Service tax Registration from Mumbai to Daman, so as to take support of such decision to further buttress the erroneous conclusion arrived by her on the only core –issue involved in the present SCNs regarding there being no nexus of the input services & Capital goods. It is well settled law that the Order-In-Original cannot travel beyond the scope of show cause notice. Therefore, on this ground alone the impugned order is erroneous and hence not legally sustainable.

2.3 He also submits that Rule 3(1) of the Cenvat Credit Rules 2004 clearly requires, in cases of both input and capital goods, as well as, in the cases of input services, that such inputs or capital goods and input services are required to be received by the manufacturer at factory premises and used in the manufacture of final products. The Commissioner’s findings to the effect that there is no restriction of input services to be received in the factory or premises of output service provider is clearly erroneous.

2.4 He also argued that the Commissioner has failed to bring on records as to how the so called capital goods – i.e. ATMs –even while installed at customer site were having nexus with the manufacturing of dutiable finished goods in their Daman premises.

2.5 He further submits that Learned Commissioner has picked up an issue totally outside the purview of the charges/ allegations against the respondent and has travelled beyond the scope of show cause notice. The core-issue contained in both the show cause notice dated 19.03.2015 & 02.02.2016 was not of cross –utilization of Cenvat credit, but in respect of whether at all such input services & capital goods had any nexus in order to be qualified as admissible ^„input services’ or ^„capital goods’ entitling the respondent for such Cenvat credit. He also argued that the case laws relied upon by the Learned Commissioner in the impugned order are not squarely applicable to the facts of the present case.

2.6 He also submits that since the Centralized registration has been amended on 20.08.2015 by the appropriate authority of Daman Commissionerate, the Commissioner‟s finding holding such amendment to be effective from March, 2014 is clearly erroneous and not consistent with the procedure prescribed under Trade Notice No. 03/2011-12 ST Dated 01.10.2011. He prays that the appeal is maintainable on facts, merits, legality and be allowed in favour of revenue.

3. On other hand Shri Prakash Shah appearing on behalf of the respondent along with Shri Suyog Bhave, reiterates the finding given by the Adjudicating Authority in the impugned order. He further submits that both the show cause notices as well as the present appeals are based on incorrect and incomplete facts, and on a myopic view of the factual matrix of the present case. The present appeal proceed on the basis that respondent was only a manufacturer of dutiable final products and completely ignore the fact that the respondent also provide the output services from their Daman Factory and was holding centralized registration at its daman factory. The impugned Order-In-Original, in paragraph 9.9(ii), has clearly held that the allegation made in the show cause notices cannot be upheld because they have not considered the factual position of the Respondent being a centralized service provider registered earlier at Mumbai and thereafter in continuity transferred to the Daman premises and that the show cause notices have been issued in total disregard of the same. These findings are not under dispute in the above appeal.

3.1 He also submits that in the present case as well, despite submitting all the requisite documents, the amendment to the centralized registration was allowed after a period of more than a year had elapsed. In particular, due to the unreasonable delay, the Respondent had to continue filing the centralized service tax return under the centralized service tax registration at Mumbai, until the time the amendment of the registration was approved. Out of abundant caution, the respondent also filed a physical copy of the return with the authorities at Daman. The contention raised in grounds of appeal that the delay in granting of centralized registration to the Respondent is on account of lapses on the part of the Respondent is baseless. It is settled principle that the registration has to be granted within 7 days of filing of the application. Thus, the centralized service tax registration of the respondent at its Daman factory is effective from the date of application for amendment i.e. from 14.01.2014.

3.2 He also submits that the Circular No. F. No. 381/23/2010/862 dated 30.03.2010 which provide for clarification as regards cross-utilization nowhere stipulates that cross-utilization is permitted only if the registration under both service tax and central excise laws are at the same place of business. On the contrary, the said circular envisages filing of returns under the two laws in different Jurisdictions. Thus, irrespective of the date on which the amendment to the centralized registration took effect, since the respondent was always registered under both service tax and excise provisions during the relevant period, the respondent was entitled to cross-utilize credit out of the common pool.

3.3 He further submits that Respondent is eligible to avail Cenvat Credit pertaining to the input services and capital goods used for providing the output services from the centralized service tax registration at the Daman Factory. Respondent is eligible to cross–utilize the said Cenvat Credit to discharge the Central Excise duty on manufactured goods. Input service and capital goods, in respect of which the Cenvat Credit was availed, were received by the respondent as provider of output services. There is no requirement that input services or capital goods used for providing output services are to be received within the factory premises of the respondent. From a bare perusal of Rule 3 (1) of Cenvat Credit Rules, 2004, it is manifest that an output service provider is eligible to avail Cenvat Credit in respect of any inputs, input services or capital goods received by such service provider. He placed reliance on the decisions of Deepak Fertilizers & Petrochemicals Corpn. Pvt. Ltd. Vs. C.C.Ex., Belapur -2013(32) STR 532 (Bom).

3.4 He also submits that the respondent availed the Cenvat Credit on the input services which were used in providing the output services of ATM services. Further respondent availed the Cenvat credit on Capital Goods viz., ATMs manufactured by it and removed from the factory on payment of duty as stock transfer to various depots from where they are cleared and installed at client site by way right to use. Thus, both the input services and capital goods were availed by the respondent as a provider of output services and the Respondent is eligible to avail Cenvat Credit in respect of the input services and capital goods even if not received or used within its factory premises. It is pertinent to note that the eligibility/nexus of the input services and capital goods as regards the output services has not been questioned either in the show cause notices or in the present appeal.

3.5 He also argued that the respondent was entitled to cross –utilize the Cenvat Credit so availed to discharge the central excise duty liability liable to be paid on the removal of the manufactured goods. He placed reliance on the following decisions:

• Commissioner of Central Excise, Pune –I Vs. S S Engineers – 2016(42)STR 31 (Bom)
• CCE, Coimbatore Vs. Lakshmi Technology & Engineering Indus. Ltd. – 2011(23) STR 265 (Tri. Chennai)
• PMT Machines Ltd. Vs. CCE Pune –I Final Order No. A/87569/17/STB dated 18.01.2017
• Shree Rajasthan Syntex Ltd. Vs. Commissioner of C.Ex, Jaipur – 2011(24) STR 670 (Tri. Del.)

From the circular and case law it is clear that a person who manufactures goods as well as provides services is entitled to avail Cenvat Credit on inputs, input services and capital goods used in both its activities and accumulate the credit in a common pool. The said credit lying in the common pool can be utilized to pay the excise duty and/or the service tax. In other words, one –to-one correlation/nexus between the credit utilized and the duty/ tax paid is not required to be made.

3.6 He also submits that the impugned order did not travel beyond the scope of show cause notice. Both the show cause notices alleged that there was a lack of nexus between the relevant input services and capital goods qua the manufacture of goods. In response to the said show cause notices in its replies dated 11.05.2015 and 13.07.2017, the respondent submitted the since it was both a manufacturer under the central excise law and a service provider under service tax law, it was entitled to avail Cenvat credit on the input services and capital goods used for providing output services and utilize the credit accumulated in the common pool for payment of excise duty. Further it is pertinent to note that taking into account the submission made by the respondent, another letter/ notice was issued by the revenue dated 08.05.2018 asking the respondent for clarifications in respect of certain alleged discrepancies in the cross–utilization. The Learned Commissioner in the impugned Order–in-Original, has therefore recorded findings in respect of the issues of centralized registration and cross– utilization of credit in order to meet the submissions made by the respondent that the issue of nexus cannot be examined since Cenvat credit was cross-utilized. In the present matter show cause notices themselves were issued based on incomplete facts and a myopic view that the respondent was only a manufacturer and the input services and capital goods did not have a nexus qua the process of manufacture.

4. We have heard both sides and perused the records. The issue involved in the present case is whether the respondent is eligible to avail and utilize the CENVAT credit on input services and capital goods at Daman unit. In the instant case, there is no dispute about the genuineness of the transaction and the duty paid documents are not doubted. The contention of the revenue in the present matter is that Cenvat credit availed by the respondent at Daman Factory on input services and capital goods did not have any nexus, directly or indirectly, with the excisable goods manufactured by the respondent at their Daman unit, therefore respondent is not eligible for said disputed Cenvat credit. However, we find that the respondent was engaged in the manufacture of ATM Machine, Computer Systems and other excisable goods at its factory at Daman. The respondent was also engaged in providing various taxable services in respect of the above manufactured goods from its factory such as ATM Operation, Maintenance or Management Services, ATM Repair Services, Information Technology Services etc.. The said services were provided across India through its various locations. Prior to January 2014, the centralized billing of the output services was registered at the Respondents Mumbai office. However in January 2014 the Centralized billing was shifted to the Daman Factory. There is no dispute on the fact that for shifting the centralized billing, the respondent applied for amendment of the Centralized service tax registration with the Assistant Commissioner of Service Tax, Mumbai for change of principle place of Business from Mumbai office to the Daman Factory. The Respondent also informed the Jurisdictional Superintendent, Central Excise Daman about the application for change of place of business from Mumbai to Daman. The necessary endorsements were granted on 20.08.2015. In this context the Ld. Commissioner by relying the Judgment of M/s Karan Chand Thapar and Brothers (Coal Shed) Ltd. 2010 (20) STR 3 CAL and Judgment of Hon‟ble Apex Court in the case of M/s M.P.V & Engineering Industries – 2003(153) ELT 485 supra rightly observed that amendment in the registration of Centralised Service Provider‟ should be considered from March 2014. The authorities have taken own time in grant of amendment of Centralized Registration from Mumbai to Daman for which Respondent cannot be made to suffer. It is to be noted that during the disputed period respondent-assessee is registered both as manufacturer as well as provider of output services.

4.1 Further, we find that the availment of Cenvat credit in respect of excise duty, service tax etc. and utilisation thereof has been provided in Rule 3 of Cenvat Credit Rules, 2004, which is reproduced below :-

Rule 3. Cenvat Credit. – (1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the Cenvat credit) of –

(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act;

(ii) the duty of excise specified in the Second Schedule to the Excise Tariff Act, leviable under the Excise Act;

(iii) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);

(iv) the additional duty of excise leviable under section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);

(v) the National Calamity Contingent duty leviable under section 136 of the Finance Act, 2001 (14 of 2001);

(vi) the Education Cess on excisable goods leviable under section 91 read with section 93 of the Finance (No.2) Act, 2004 (23 of 2004);

(via) the Secondary and Higher Education Cess on excisable goods leviable under section 136 read with section 138 of the Finance Act, 2007 (22 of 2007);

(vii) the additional duty leviable under section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under clauses (i), (ii), (iii), (iv), (v), (vi) and (via);

(viia) the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act :

Provided that a provider of taxable service shall not be eligible to take credit of such additional duty;

(viii) the additional duty of excise leviable under section 157 of the Finance Act, 2003 (32 of 2003);

(ix) the service tax leviable under section 66 of the Finance Act;

(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004); and

(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and

(xi) the additional duty of excise leviable under section 85 of Finance Act, 2005 (18 of 2005),

From the reading of the above rule, it is clear that the credit of either excise duty paid on input /capital goods or service tax paid on the input services have been termed as ^„Cenvat credit‟ and the said Cenvat credit is allowed to be availed by the manufacturer and service provider and utilised either for payment of excise duty or for payment of service tax. In the said provisions, there is no explicit condition that for manufacture and services provider separate account has to be maintained for availment of Cenvat credit and utilization of Cenvat credit. Therefore in the absence of any such restriction or prohibition, the assessee is free to maintain a consolidated Cenvat account and discharge the excise duty as well as the service tax. The CENVAT credit is kind of common kitty into which credit of duty paid on inputs and capital goods and credit of service tax paid on input services can be taken.

4.2 Since the respondent is both a manufacturer and provider of output services from their Daman factory during the disputed period they are eligible for availment of Cenvat credit on input, capital goods and input services used for providing output services from the centralized service tax registration at the Daman factory and used for manufactured goods and for providing their output services. Further Cenvat being a beneficial piece of legislation, which was enacted for removing the cascading effect, the denial of credit citing procedural irregularities is unsustainable.

4.3 It has also been argued by the revenue in the present matter that service tax paid for services received and credit availed for services outside daman factory at ATM side would not be eligible for credit. In this context we find that it is a settled position that for availing the Cenvat credit the location from where the output service provided is not relevant. As long the service is provided by the service provider for which any input service is received and used for providing output service, the Cenvat credit on such input services shall be available and also for utilizing the said Cenvat credit for payment of service tax on the output service. Therefore, the location from where the service is provided and received is immaterial for availing the Cenvat credit on input services as well as for payment of service tax on the output services. Further we observed that, the definition of “input service” is vider defined in Rule 2(l), and it would mean any service used by a provider of taxable service for providing an output service or used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal. We also agree with argument of respondent that there is no restriction in Rule 2(l) of Cenvat Credit Rules, 2004 in respect of the input service to be received and utilized only in the factory or premises of the output service provider. Thus, for the above reasons, we find that the Ld. Commissioner rightly allowed the Cenvat credit to the respondent in the present matter.

4.4 The Central Board of Excise and Customs also issued the clarification on this issue in the letter F. No. 381/23/2010/862, dated 30-3-2010 also examined the matter which is reproduced below:-

“F. No. 381/23/2010/862

Dated:30-3-2010

Subject : Cross utilization of credit on inputs and input services-reg.

Under the existing provisions, a manufacturer who is also providing taxable services is required to obtain registration as manufacturer of excisable goods and also as provider of taxable services and is required to file ER-1 and ST-3 returns separately. In some cases, these returns are filed in different jurisdictions. The Cenvat credit on inputs, capital goods and input services which are used for manufacture of goods or for provision of services is available in a common pool and can be used for payment of excise duty and/or service tax. Therefore, the amount of Cenvat credit taken during a period, which is shown in ER-1 or ST-3 return, should be same. Apprehensions have been raised by some field formations that the assessee may misuse the Cenvat credit facility by declaring different amounts of credit taken or utilized in ER-1 and ST-3 returns, especially when periodicity for filing both the returns are different.

2. The matter has been examined by the Board and it has been decided that while carrying out audit of Central Excise assessees, the Service Tax return filed by the assessee should also be scrutinized, in order to verify that Cenvat credit claimed in both the returns is same. Further, where both the returns are filed in the same Commissionerate, then audit of both the activities should be undertaken at the same time. If these returns are being filed separately (one with the Excise Commissionerate and the other with the Service Tax Commissionerate), then while undertaking Service Tax audit, the officer should verify the Excise returns also, for confirming correctness of credit.

From the above Board’s letter also it is clear that the availment and utilisation of Cenvat credit from common pool of Excise duty as well as Service Tax is permissible.

4.5 We also find that disputed issue is the present matter is already settled in favour of the respondent in various cases cited by the respondent. In those Judgments, it was decided the general principles in respect of availment and utilisation of credit. We also find that Apex Court in the case of Ramesh Foods Ltd. – 2004 (174) E.L.T. 310 (S.C.) held that there is no requirement of one-to-one co-relation in availment of Cenvat. Some of the judgments on this issue are reproduced below:

(a) In the case of S.S engineers the Hon’ble Bombay High Court dealing with a similar issue decided as under:

“Appellants are engaged in the manufacture of sugar machinery and parts thereof. They also undertake erection and commissioning of sugar machinery at the customers site. Appellants have taken separate registration as a manufacturer, as also as the service provider with the respective authorities. They availed the input and input service credit in respect of the manufacturing activity and pay the Excise duty on the goods manufactured in their factory. They also availed the credit of input and input services in respect of erection and commissioning of the machinery and also pay the Service Tax on the said activity. During the scrutiny, it was found that appellant availed credit of Service Tax on the services which are required in connection with erection and commissioning service but utilized the same for payment of Excise Duty on the manufacture of sugar machinery and parts thereof. Accordingly, a demand notice was issued and the impugned order was passed after hearing the party.

2. The issue in this case is whether the Cenvat credit of input services required for providing output service could be utilized for payment of Excise duty on the goods manufactured by the appellant.

3. The learned Counsel for the appellant argued that there is no restriction under the Cenvat Credit Rules, 2004 for cross utilization of the Cenvat credit and various Benches of this Tribunal has held so. In support of this argument the learned Counsel quoted the following judgments:

• Welspun Maxsteel Ltd. v. CCE, Raigad [2013 (31) S.T.R. 64 (Tri.-Mum.)];
• Jyoti Structures Ltd. v. CCE, Nasik [2012 (285) E.L.T. 356 (Tri.-Mum.) = 2012 (28) S.T.R. 380 (Tri.-Mum.)];
• Forbes Marshall Pvt. Ltd. v. CCE, Pune reported in 2010 (258) E.L.T. 571 (Tri.-Mum.) = 2010 (20) S.T.R. 186 (T);
• CCE, Coimbatore v. Lakshmi Technology and Engg. Industries Ltd. [2011 (23) S.T.R. 265 (Tri.-Mad.)];
• CCE v. Alidhara Textool Engineers Pvt. Ltd. reported in 2009 (239) E.L.T. 334 (Tri.-Ahmd.) = 2009 (14) S.T.R. 305 (T)].

4. The learned Additional Commissioner (AR), on the other hand, vehemently argued that it is absolutely necessary to have segregated account in respect of input and input services relating to manufactured goods, as also input and input services used in relation to providing the output services. The learned AR’s argument was that the Service Tax is collected under the Finance Act, 1994, while Central Excise Duty is collected under the Central Excise Act, 1944 and that two Acts operates in their respective domains, lay down authority for availment or utilization within their respective domains and there is nothing in law to permit cross operation of such accounts for utilization of such credit beyond the respective laws. The learned AR also argued that the appellant is registered separately for the manufacturing activity and as a provider of output service and there are separate authorities for the two. Each authority in assessment stage is entitled to examine the admissibility of each of the Cenvat credit entry in the context of registered activity under its domain, jurisdiction and competence. In the absence of segregated account, the authority shall be at loss to examine the issue to its conclusive state. He also advanced various arguments why it is administratively necessary to have separate accounts and elaborated various restrictions imposed under Rule 3(4) of the Cenvat Credit Rules, 2004 in this respect. He also quoted Rule 6(2) of Cenvat Credit Rules which provides maintaining separate account for taxable and exempted service. The learned AR also advanced argument that the Returns in case of Service Tax is filed half-yearly, while in the case of Excise these are monthly and if unified account is maintained it will create confusion. He also argued that the issue before the Tribunal in the case of Forbes Marshall Pvt. Ltd. quoted by the learned Counsel for the appellant has been unduly stretched and Tribunal’s decision is therefore, not a very good law.

5. We have considered the rival submissions. We have gone through the Cenvat Credit Rules. We find that Rule 2 defines input, input services, capital goods etc. Before availing Cenvat credit, a manufacturer or service provider has to satisfy the definitions provided under the said Rules. Rule 3(1) of the Cenvat Credit Rules states that a manufacturer or producer of final products or provider of taxable service shall be allowed to take credit of various duties specified in various sub-clauses therein. The specified duties among various duties include duty of excise specified in the First Schedule to the Excise Tariff leviable under the Excise Act as also Service Tax leviable under different Sections of the Finance Act, 1994. Sub-rule (4) of Rule 3 provides that Cenvat credit may be utilized for payment of various liabilities and includes any duty of excise on any final product as also Service Tax on any output service (other situations also covered under the said sub-rule, which are not relevant in the present case). Thus, we find that Rule 3 of the Cenvat Credit Rules, 2004 does not stipulate maintaining separate account as a manufacturer and as a service provider. Third proviso to sub-rule (4) of Rule 3, provides that no credit of the additional duty leviable under sub-section (5) of Section 3 of the Customs Tariff Act, shall be utilized for payment of Service Tax on any output service. Similar restrictions are in other proviso. We also note that there are certain restrictions on the utilization of particular type of duties which are elaborated in sub-rule (b) of Rule 7 of the Cenvat Credit Rules. These restrictions do not cover cross utilization of credit of Excise and Service Tax, as a general proposition.

6. We have also gone through the various case laws quoted by the learned Counsel for the appellant and we note that in the case of CCE, Pune v. Lakshmi Technology and Engineering Industries Ltd. (supra) in para 6 has observed as under :

6. I have carefully considered the submissions from both sides and perused the records. Rule 3(1) of the Cenvat Credit Rules permits credit to a manufacturer of final product or a service provider of taxable service. If a person manufactures only excisable goods, he is entitled to take credit of not only Excise Duties paid on capital goods and inputs but also additional duty of Customs paid under the Customs Tariff Act in respect of imported inputs and capital goods and also Service Tax paid on the input services utilized in or in relation to the manufacture of the excisable goods. In other words, a manufacturer of excisable goods is entitled to use the credit from a common pool to which different categories of specified Excise Duties, Customs Duty and Service Tax are allowed to be taken as credit. Similarly, a provider of taxable service is also entitled to take credit of specified Excise Duty, additional duty of Customs and Service Tax in respect of input services and utilize the credit from all these sources for the purpose of paying Service Tax. The objection by the Department is that the respondent who is both a service provider and a manufacturer should maintain two separate accounts one in respect of credit attributable to inputs, capital goods and services meant for excisable goods and credit attributable to capital goods, inputs and services attributable to the service provided by them. Common Cenvat Credit Rules have been framed in terms of powers conferred by Section 37 of the Central Excise Act, 1944 and Section 94 of the Finance Act, 1994. Rule 3(1) enables a ‘manufacturer’ or a ‘provider of taxable service’ to take credit of specified duties and utilize them to discharge duty liability under Rule 3(4) of the Cenvat Credit Rules. A credit can be utilized for payment of any duty of Excise on any final product or for payment of Service Tax on any output service. The respondent is undisputedly registered as a service provider for providing the services of renting of immovable property. The credit taken by them as manufacturer/service provider has been used both for paying Excise Duty and for paying Service Tax. The rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purposes and there is no restriction placed to the effect that credit accounts should be maintained for use for manufacture of excisable goods and for use for providing services. Therefore, the view taken by the Commissioner (Appeals) cannot be faulted. The clarification sought to be relied upon by the Department that input credit service taken only if the output is a service liable to Service Tax has no relevance to the present case. Undisputedly, the respondents have registered themselves as service provider of service of renting of immovable property and paying Service Tax as provider of output service and therefore the utilization of credit taken by them is valid.

7. In addition to above, we have also gone through the format of ER-1 return and ST-3 return. Sr. No. 8 and the Table details the Cenvat credit taken and utilized. In ER-1 return, in Table at Sr. No. 8, in column (9), details about Service Tax are specifically listed. On careful analysis of the said format, the intention appears to be to permit cross utilization of the credit of Excise Duty and Service Tax.

8. In view of above analysis the appeal is allowed.”

(b) The above judgment of the Hon‟ble High Court was passed in the matter of Tribunals order reported as S.S engineer 2015 (317) ELT 597 wherein Tribunal has passed following order:

“5. We have considered the rival submissions. We have gone through the Cenvat Credit Rules. We find that Rule 2 defines input, input services, capital goods etc. Before availing Cenvat credit, a manufacturer or service provider has to satisfy the definitions provided under the said Rules. Rule 3(1) of the Cenvat Credit Rules states that a manufacturer or producer of final products or provider of taxable service shall be allowed to take credit of various duties specified in various sub-clauses therein. The specified duties among various duties include duty of excise specified in the First Schedule to the Excise Tariff leviable under the Excise Act as also Service Tax leviable under different Sections of the Finance Act, 1994. Sub-rule (4) of Rule 3 provides that Cenvat credit may be utilized for payment of various liabilities and includes any duty of excise on any final product as also Service Tax on any output service (other situations also covered under the said sub-rule, which are not relevant in the present case). Thus, we find that Rule 3 of the Cenvat Credit Rules, 2004 does not stipulate maintaining separate account as a manufacturer and as a service provider. Third proviso to sub-rule (4) of Rule 3, provides that no credit of the additional duty leviable under sub­section (5) of Section 3 of the Customs Tariff Act, shall be utilized for payment of Service Tax on any output service. Similar restrictions are in other proviso. We also note that there are certain restrictions on the utilization of particular type of duties which are elaborated in sub-rule (b) of Rule 7 of the Cenvat Credit Rules. These restrictions do not cover cross utilization of credit of Excise and Service Tax, as a general proposition.

6. We have also gone through the various case laws quoted by the learned Counsel for the appellant and we note that in the case of CCE, Pune v. Lakshmi Technology and Engineering Industries Ltd. (supra) in para 6 has observed as under :

6. I have carefully considered the submissions from both sides and perused the records. Rule 3(1) of the Cenvat Credit Rules permits credit to a manufacturer of final product or a service provider of taxable service. If a person manufactures only excisable goods, he is entitled to take credit of not only Excise Duties paid on capital goods and inputs but also additional duty of Customs paid under the Customs Tariff Act in respect of imported inputs and capital goods and also Service Tax paid on the input services utilized in or in relation to the manufacture of the excisable goods. In other words, a manufacturer of excisable goods is entitled to use the credit from a common pool to which different categories of specified Excise Duties, Customs Duty and Service Tax are allowed to be taken as credit. Similarly, a provider of taxable service is also entitled to take credit of specified Excise Duty, additional duty of Customs and Service Tax in respect of input services and utilize the credit from all these sources for the purpose of paying Service Tax. The objection by the Department is that the respondent who is both a service provider and a manufacturer should maintain two separate accounts one in respect of credit attributable to inputs, capital goods and services meant for excisable goods and credit attributable to capital goods, inputs and services attributable to the service provided by them. Common Cenvat Credit Rules have been framed in terms of powers conferred by Section 37 of the Central Excise Act, 1944 and Section 94 of the Finance Act, 1994. Rule 3(1) enables a ‘manufacturer’ or a ‘provider of taxable service’ to take credit of specified duties and utilize them to discharge duty liability under Rule 3(4) of the Cenvat Credit Rules. A credit can be utilized for payment of any duty of Excise on any final product or for payment of Service Tax on any output service. The respondent is undisputedly registered as a service provider for providing the services of renting of immovable property. The credit taken by them as manufacturer/service provider has been used both for paying Excise Duty and for paying Service Tax. The rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purposes and there is no restriction placed to the effect that credit accounts should be maintained for use for manufacture of excisable goods and for use for providing services. Therefore, the view taken by the Commissioner (Appeals) cannot be faulted. The clarification sought to be relied upon by the Department that input credit service taken only if the output is a service liable to Service Tax has no relevance to the present case. Undisputedly, the respondents have registered themselves as service provider of service of renting of immovable property and paying Service Tax as provider of output service and therefore the utilization of credit taken by them is valid.

7. In addition to above, we have also gone through the format of ER-1 return and ST-3 return. Sr. No. 8 and the Table details the Cenvat credit taken and utilized. In ER-1 return, in Table at Sr. No. 8, in column (9), details about Service Tax are specifically listed. On careful analysis of the said format, the intention appears to be to permit cross utilization of the credit of Excise Duty and Service Tax.

8. In view of above analysis the appeal is allowed.”

(c) This issue was also considered in the case of Lakshmi Technology & Engineering industries limited (Supra) wherein the Tribunal has passed the following order:

“6. I have carefully considered the submissions from both sides and perused the records. Rule 3(1) of the CENVAT Credit Rules permits credit to a manufacturer of final product or a service provider of taxable service. If a person manufactures only excisable goods, he is entitled to take credit of not only excise duties paid on capital goods and inputs but also additional duty of customs paid under the Customs Tariff Act in respect of imported inputs and capital goods and also service tax paid on the input services utilized in or in relation to the manufacture of the excisable goods. In other words, a manufacturer of excisable goods is entitled to use the credit from a common pool to which different categories of specified excise duties, customs duty and service tax are allowed to be taken as credit. Similarly, a provider of taxable service is also entitled to take credit of specified excise duty, additional duty of customs and service tax in respect of input services and utilize the credit from all these sources for the purpose of paying service tax. The objection by the Department is that the respondent who is both a service provider and a manufacturer should maintain two separate accounts one in respect of credit attributable to inputs, capital goods and services meant for excisable goods and credit attributable to capital goods, inputs and services attributable to the service provided by them. Common CENVAT Credit Rules have been framed in terms of powers conferred by Section 37 of the Central Excise Act, 1944 and Section 94 of the Finance Act, 1994. Rule 3(1) enables a ‘manufacturer’ or a provider of taxable service’ to take credit of specified duties and utilize them to discharge duty liability under Rule 3(4) of the CENVAT Credit Rules. A credit can be utilized for payment of any duty of excise on any final product or for payment of service tax on any output service. The respondent is undisputedly registered as a service provider for providing the services of renting of immovable property. The credit taken by them as manufacturer service provider has been used both for paying excise duty and for paying service tax. The rules permit taking of credit under a common pool and permit use of the credit from the common pool for different purposes, and there is no restriction placed to the effect that credit accounts should be maintained for use for manufacture of excisable goods and for use for providing services. Therefore, the view taken by the Commissioner (Appeals) cannot be faulted. The clarification sought to be relied upon by the Department that input credit service taken only if the output is a service liable to service tax has no relevance to the present case. Undisputedly, the respondents have registered themselves as service provider of service of renting of immovable property and paying service tax as provider of output service and therefore the utilization of credit taken by them is valid.

7. The appeal is therefore dismissed.”

(d) In the case of Areva T&D India Ltd the tribunal taken the similar view as under:

“7.1 Regarding the second objection that the service tax credit has been used by the respondents in respect of goods manufactured and cleared by them, there is no merit in the same. Rule 3(1) of the CENVAT Credit Rules permit a ‘manufacturer’ or a ‘service provider’ to take credit of duty paid on inputs, capital goods and service tax paid on input service. In the present case, the respondents is both a ‘manufacturer’ and a ‘service provider’. There is no stipulation in the rule that there should be separate CENVAT credit accounts maintained when the respondents are acting both as a ‘manufacturer’ and a ‘service provider. The CENVAT credit is a kind of common kitty into which (a) credit of CVD paid on imported goods (if any) is taken; (b) credit of duty paid on inputs and capital goods procured locally from the domestic market is taken; and (c) credit of service tax paid on services utilised taken.

7.2 Rule 3(4) provide for manner of utilization of the credit. There is no violation in utilizing the credit from the common kitty for payment of excise duty on goods manufactured and cleared by the respondents and for paying service tax on the services provided by the respondents. Therefore, the objection on this ground is also not valid.”

Above judgments support the case of the respondent. We do not agree with the revenue’s submission in grounds of appeal that the above judgments are distinguishable.

5. As per our above discussion we find that the impugned order is correct and legal which does not require any interference. We therefore, uphold the impugned order and dismiss the Revenue’s appeal.

(Pronounced in the open court on 01.08.2023)