Quashing of demand of service tax as inclusion of T/o of manufacturing unit for quantification of amount for reversal of CENVAT Credit was appropriate

Commissioner Of Central Tax Vs Lenovo (India) Pvt Ltd (CESTAT Bangalore)

Conclusion: Service Tax demand was quashed as inclusion of turnover of Manufacturing unit for quantification of amount for reversal of CENVAT Credit was appropriate since for the entire remaining activities of the Puducherry manufacturing unit, the centralized service tax registration at Bangalore was applicable, which was as a SERVICE PROVIDER as well as an INPUT SERVICE DISTRIBUTOR.

Held: Assessee was providing both taxable and exempted services (trading) and was availing cenvat credit on input services common to both services. During audit, it was observed that there was short payment, in terms of Rule 6(3A) of CCR,2004; the department issued a Show Cause Notice, dated 23.04.2016, to assessee, proposing to demand and recover an amount of Rs. 47,00,31,471, for the period during October 2010 to March 2010, alleging incorrect determination of the amount to be reversed proportionately under Rule 6(3A)(c)(iii) of the Cenvat Credit Rules, 2004; Department further proposed to demand credit of Rs. 19,92,836/- availed for the period during October 2010 to March 2015; during the course of Audit department reversed credit of Rs 28,04,34,114. The adjudicating authority dropped the demand for the period prior 1.4.2011 (Rs.3,17,17,271) on the ground that trading was classified as an exempted service only from 1.4.2011 and observed that since assessee had reversed Rs.67,04,088/- voluntarily, the relevant statutory provisions of Rule 6(2) prevalent during the material point of time, had been satisfied. With regard to the remaining demand of Rs.43, 83,14,200, for the period from 04/2011 to 03/2015; the objection in the SCN was against inclusion of turnover of the Puducherry manufacturing unit, for quantification of total turnover under Rule 6(3). It was the case of the department that as the Puducherry unit was separately registered under the provisions of Central Excise and Service Tax, the turnover of Puducherry unit should not be considered while computing the tax credit reversable by the head office of the respondents who were also registered as Input Service Distributors. It was the claim of assessee that assessee was an ISD and accordingly issue invoice for distributing the credit of service tax to all manufacturing/service units; they had to distribute credit as per the mechanism set out in Rule 7 of the CCR, 2004.  It was held that  on scrutiny of the service tax registration certificate issued for Puducherry unit was seen that the registration for service tax at Puducherry was only for payment of service tax under reverse charge mechanism on GTA services and on import of taxable services from abroad, which were meant exclusively for the Puducherry manufacturing unit. With regard to the entire remaining activities of the said Puducherry manufacturing unit, the centralized service tax registration No.AABC13372HST001 at Bangalore was applicable, which was as a SERVICE PROVIDER as well as an INPUT SERVICE DISTRIBUTOR. Thereby, inclusion of the turnover of the Puducherry manufacturing unit for the purpose of quantification of amount under the said Rule 6(3) was appropriate. As such, the proposed demand failed on merit.

FULL TEXT OF THE CESTAT BANGALORE ORDER

Heard both sides and perused the records of the case

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