Dell International Services India Pvt. Ltd. Vs C.C.E. & S.T. (CESTAT Bangalore)
The issue under consideration is whether ITC attributable to taxable output included in formula of determining ITC of exempted goods or services?
Rule 6 of Cenvat Credit Rules was re-drafted, particularly Rule 6(iii) which is as follows:
(i) No credit of inputs or input services used exclusively in manufacture of exempted goods or for provision of exempted services shall be available;
(ii) Full credit of input or input services used exclusively in final products excluding exempted goods or output services excluding exempted services shall be available;
(iii) Credit left thereafter is common credit and shall be attributed towards exempted goods and exempted services by multiplying the common credit with the ratio of value of exempted goods manufactured or exempted services provided to the total turnover of exempted and non exempted goods and exempted and non-exempted services in the previous financial year.
10.10 It is categorically held by the learned Commissioner that on a cogent reading of sub-rule (ii) and (iii) above, it is clear that input credit attributable to ITSS (which is a taxable output service) is not to be included in the formula of determining credit attributable towards exempted goods and exempted services. Learned Commissioner also observed that in view of the Budget Circular vide D.O.F No. 334/08/2016-TRU, stating that Rule 6 has been re-drafted with the intention of simplifying and rationalizing the Rule, without altering the already established principles of reversal of such credit, this only means that amendment to Rule 6 is clarificatory in nature and is retrospective in effect.
FULL TEXT OF THE CESTAT JUDGEMENT
Dell India Pvt. Ltd. (DIPL) presently known as Dell International Services India Ltd. is a SEZ unit at Sriperumbudur for manufacturing various computer systems. They have got centralized registration under Service Tax under the category ‘Management, Maintenance and Repair Service,’ ‘Erection, Commissioning and Installation Service, Business Auxiliary Service and Information Technology Software Service.
2. Appellant availed service tax credit on several input services during the period 2008-09 and filed a rebate claim in respect of export of taxable service under BAS, stating that they could not utilize the credit availed for payment of service tax, due to the export of services. In response to query appellant further clarified that the input services have been consumed in marketing in pre-sale and support services activities, among others. The summary of input credit availed/utilized was filed along with the rebate claim. The appellant was also engaged in trading and they were following the procedure prescribed under Rule 6(3A) of Cenvat Credit Rules, to determine the ineligible cenvat credit attributable to exempted services. It appeared to Revenue that while calculating the percentage of ineligible credit under Rule 6(3A), appellants have not included the amount of cenvat credit availed on Information Technology and Software Services (ITSS for short) contending that such ITSS is also a taxable output service, which contention appears to be incorrect.
3. On scrutiny of the ST-3 returns for the financial year 2008-09, the tax liability and its payment appeared as follows:
