Case Law Details
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.
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No. ST/589/2010
Arising out of Order-in-Appeal No.48/2010-ST Dated: 31.5.2010
Passed by the Commissioner of Customs, Central Excise and Service Tax (Appeals), Coimbatore
Date of Decision: 10.02.2011
CCE, COIMBATORE
Vs
M/s LAKSHMI TECHNOLOGY AND ENGINEERING INDUSTRIES LTD.
FINAL ORDER NO. 297/11
Per: M Veeraiyan:
This is an appeal by the Department against the order of the Commissioner (Appeals) No. No. 48/2010-ST dated 31.5.2010.
2. Heard both sides.
3. The respondents is a manufacturer of satellite components and aircraft components classifiable under Chapter sub-heading 88033000 and they are paying excise duty on these goods. They are also providing service of renting of immovable property coming under Section 65(105) (zzzz) of Finance Act, 1994. The respondents have availed credit of excise duty paid on capital goods and inputs and service tax paid on input service. They have used the credit in CENVAT account for paying excise duty on the excisable goods cleared by them and also for paying service tax on the services rendered under the category of “Renting of Immovable Property”. Show Cause Notice was issued alleging that the capital goods, inputs and input services on which credit was taken has no nexus with the renting of immovable property service and therefore the CENVAT credit could not be utilized by them and accordingly proposing demand of service tax of Rs.1,99,801/- along with interest and proposing imposition of penalties. Original authority accordingly passed the following order:-
“1. I confirm the demand of Rs.1,99,801/- (Rupees one lakh ninety nine thousand eight hundred and one only) (Service Tax Rs.1,93,987/-, Education cess Rs.4,074/- and SHE cess Rs.1,740/- which has been paid wrongly by utilization of Cenvat credit and not paid in cash under Rule 14 of CENVAT Credit Rules, 2004 read with Section 73(1) of the Finance Act, 1994.
2. I also confirm the demand of interest at the appropriate rate on the amount demanded above in terms of Section 75 of Finance Act, 1994.
3. I also impose a penalty of Rs.200/- per day for every day during which such failure continues subject to a maximum amount of service tax that the assessee failed to pay in terms of Section 76 of the Finance Act.”
On appeal by the party, the Commissioner (Appeals) has set aside the order of the original authority. Hence the department is in appeal.
4. Learned SDR, reiterating the grounds of appeal, submits that in respect of renting of immovable property services, they could not use credit on capital goods, inputs and service tax which are not actually utilized in respect of such services of renting of immovable property. He also relies on the Circular of the Board No. 98/1/2008-ST dated 4.1.2008 which clarified certain queries as follows:-
Query:-
“Whether or not, commercial or industrial construction or works contract service used for construction of an immovable property, could be treated as input service for the output service namely renting of immovable property service under the CENVAT Credit Rules, 2004?”
Classification
‘Input credit of service tax can be taken only if the output is a ‘service’ liable to service tax or a ‘goods’ liable to excise duty. Since immovable property is neither ‘service’ or ‘goods’ as referred to above, input credit cannot be taken’.
5. Learned authorized representative strongly supports the order of the Commissioner (Appeals).
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.
(Dictated and pronounced in open court)
