Case Law Details
Integra Engineering India Limited Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)
Introduction: The case of “Integra Engineering India Limited vs. Commissioner of Central Excise & ST” heard by the Central Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad involves the utilization of Cenvat credit for the payment of service tax. The central question revolves around whether an appellant, engaged in both manufacturing and service provision, is eligible to use Cenvat credit related to manufacturing activities to pay service tax on output services. This article provides an in-depth analysis of the case, including the key facts, arguments, CESTAT’s findings, and the conclusion.
Detailed Analysis:
1. Background of the Case: Integra Engineering India Limited is involved in both the manufacturing of excisable goods and the provision of output services, specifically renting immovable property. They hold Central Excise registration for manufacturing and Service Tax registration for their service. The appellant avails Cenvat credit on inputs and input services for their manufacturing activities. They used Cenvat credit from the common pool, including that related to manufacturing, to pay service tax on renting immovable property.
2. Key Arguments: The department argued that since the Cenvat credit was availed on inputs and input services related to manufacturing, it couldn’t be used to pay service tax on renting immovable property. The show cause notice demanded service tax payment for this reason. The appellant contended that there was no prohibition on utilizing credit related to manufacturing for service tax payment when an entity is engaged in both activities.
3. CESTAT Ahmedabad’s Decision: CESTAT Ahmedabad examined the issue, primarily focusing on whether an appellant with dual activities could maintain a consolidated Cenvat account for both manufacturing and services. The tribunal cited various judgments, including the decision in the case of CCE, Nashik vs. Graphite India Limited, which supported the appellant’s position. The judgments and a Board circular confirmed that there were no restrictions on using a common pool of Cenvat credit for payment of both excise duty and service tax.
CESTAT Ahmedabad observed that Rule 3 of the Cenvat Credit Rules, 2004, allowed the utilization of Cenvat credit for either excise duty or service tax payment, without specifying the need for separate accounts. The tribunal concluded that the appellant had rightly paid service tax from the common pool of Cenvat credit. The demand for service tax was deemed unsustainable, and the impugned order was upheld.
4. Conclusion: In conclusion, CESTAT Ahmedabad’s ruling in the case of Integra Engineering India Limited affirms the validity of using Cenvat credit, even when related to manufacturing activities, for the payment of service tax when an entity is engaged in both manufacturing and service provision. The decision aligns with previous judgments and a Board circular, establishing that cross-utilization of Cenvat credit is permissible. The appellant’s appeal was allowed, and the impugned order was set aside.
The ruling reinforces the ability of entities engaged in both manufacturing and services to utilize Cenvat credit for service tax payment, regardless of the source of the credit.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is whether the appellant is eligible to utilize Cenvat credit of input and inputs service related to manufacturing of goods for payment of service tax on output service when the assessee is involved in both manufacturing as well as service providing.
2. The brief facts of the case are that appellant are engaged in the manufacture of excisable goods namely draw frame, fabrication work, job work for which they are holding Central Excise registration and at the same time they are also engaged in providing output service of renting of immovable property for which they are registered with Service Tax department. They are availing Cenvat credit on inputs and input services for the manufacturing activities. The appellant have utilized Cenvat credit from the common pool for payment of service tax by utilizing the Cenvat credit availed on input service for manufacturing activity. The case of the department is that since the credit is availed on input and input service relating to manufacturing activity, the same cannot be utilized for payment of service tax of renting of immovable property. Accordingly, show cause noticewa issued for demanding service tax on renting of immovable property service. The said show cause notice was adjudicated whereby Cenvat credit of Rs. 37,42,385/- was disallowed on the ground of wrong utilisation of the same and also confirmed the demand of service tax to be paid in cash under Section 73(1) of the Finance Act, 1994. On the confirmation of demand, interest was also demanded under Section 75 and penalty was also imposed under Section 78 of the Finance Act, 1994. Being aggrieved by the order-in-original, appeal was filed before Commissioner (Appeals) who vide impugned order dated 15.07.2015 upheld the order-in-original and rejected the appeal filed by the appellant. Therefore, the present appeal.
3. Shri Tapas Ruparelia, learned Chartered Accountant appearing on behalf of the appellant, at the outset submits that there is no bar for utilisation of credit related to manufacturing activity for payment of service tax when the assessee is involved in both the activities i.e. manufacturing as well as provisioning of service. He placed reliance on the decision of this Tribunal in the case of CCE, Nashik vs. Graphite India Limited – 2017 (3) GSTL 505 (Tri. Mumbai).
4. Shri Ajay Kumar Samota, learned Superintendent (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. On careful consideration of the submissions made by both the sides and perusal of record, we find that the issue involved is whether the appellant is entitled to utilize the credit from the common pool of Cenvat credit. We find that this issue is no more res-integra as the same haz been decided in various decisions which have been considered in the judgment in the case of Graphite India Limited (supra). The order is reproduced below:-
“[Order]. – The fact of the case is that respondent is engaged in the manufacturing activity as well as providing services of GTA service, Business Auxiliary Service, Repair and Maintenance service and Commercial Construction service. They are availing Cenvat credit of inputs and input services used in the manufacture of final product as well as for providing the aforesaid services. They are maintaining consolidated records for availment/utilisation of Cenvat credit on inputs and input services pertaining to manufacturing activities as well as services provided by them. The show cause notice was issued proposing demand of service tax paid by utilising the Cenvat credit availed from a common pool. The adjudicating authority confirmed the demand, imposed penalties and demanded interest. Being aggrieved by that Order-in-Original the respondent filed appeal before the Commissioner (Appeals), who vide impugned order allowed the appeal and set aside the Order-in-Original. Therefore Revenue is before me.
2. Shri A.B. Kulgod, ld. Asstt. Commissioner (AR) appearing on behalf of the Revenue reiterates the grounds of appeal and submits that the respondent was required to maintain separate Cenvat account for manufacturing activity and their service activity for the reason that there are separate input and services for manufacturing and services. Cenvat credit related to manufacturing cannot be utilised for providing the payment of service tax in respect of output service.
3. On the other hand, Ms. Mansi Patil, ld. counsel for the respondent submits that the cross utilisation of Cenvat credit between the manufacturing and services is allowed as held in various following judgments :-
(a) S. Engineers – 2015 (317) E.L.T. 597 (T) = 2015 (38) S.T.R. 614 (Tribunal)
(b) Jyoti Structures – 2012 (285) E.L.T. 356 (T) = 2012 (28) S.T.R. 380 (Tribunal)
(c) Godavari Sugar Mills – 2015-TIOL-2491-HC-KAR = 2015 (40) S.T.R. 1063 (Kar.)
(d) Lakshmi Technology & Engineering Inds. Ltd. – 2011-TIOL-700-CESTAT-MAD = 2011 (23) S.T.R. 265 (Tri.-Chen.).
She further submits that even the Board vide letter F. No. 381/23/2010/862, dated 303-2010 also accepted that utilisation of credit, from a common pool for payment of excise duty on manufactured goods and for payment of service tax on output service is allowed. As per the above judgments and Board circular there is no restriction in payment of service tax from a common pool of Cenvat credit.
4. I have carefully considered the submission made by both sides. I find that the issue lies in a narrow compass that whether an assessee is a manufacturer as well as service provider can maintain a consolidated Cenvat account in respect of input and input services used for both the activities and pay the excise duty and service tax from such consolidated account. I 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),
5. From the reading of the above rule, it is clear that the credit of either excise duty paid on input or service tax paid on the input services have been termed as ‘Cenvat credit’ and the said Cenvat credit is allowed to be 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 separate account has to be maintained. 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 liability from such common pool. The judgments cited by the ld. counsel for the respondent directly support their case. The Board in the letter F. No. 381/23/2010/862, dated 30-3-2010 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.
(Gautam Ray)
Director General”
6. From the above Board’s letter also it is clear that the utilisation of Cenvat credit from common pool for payment of excise duty and/or service tax is permissible. As per my above discussion and the issue being non res integra in the light of the above judgments as well as per the Board’s above referred letter, the respondent has rightly paid the service tax from a common pool of Cenvat credit. The impugned order is correct and legal which does not require any interference. I therefore, uphold the impugned order and dismiss the Revenue’s appeal.”
6. From the above decision of this Tribunal which has relied upon the decision of Hon’ble Karnataka High Court, the issue is no more res-integra as it has been decided that utilisationof credit for payment of service tax is permissible. Therefore, the demand in the present case cannot be sustained. Accordingly the impugned order is set-aside and the appeal is allowed.
(Pronounced in the open court on 05.09.2023 )
