Mould Equipment Limited Vs Commissioner of CGST & CX, Howrah Commissionerate (CESTAT Kolkata)
ST – Where Cenvat credit wrongly taken is subsequently reversed, it is tantamount to non-availment of credit – Rule 6(3) of Cenvat Credit Rules (CCR)is inapplicable in such circumstances: CESTAT Kolkata
In the present case, it is an admitted fact that the appellant did not maintain separate accounts for the input services used in or in relation to the provision of taxable service as well as exempt service. Therefore, two options were available to them, i.e., either to pay 6% of value of the exempted service or pay an amount equal to the credit attributable to the input services used in or in relation to exempt services subject to the provisions of Sub-rule (3A). When the mistake was pointed, the appellant reversed the proportionate common credit taken on input services used in the provision of exempt services. Therefore, Rule 6(3) (i) will not have any application, when a credit is taken wrongly and the same is reversed as it tantamount to non-availment of the credit.
FULL TEXT OF THE CESTAT JUDGEMENT
The appellant assessee is in appeal against the Order-in-Appeal dated 31/10/2017 wherein demand of CENVAT credit reversal amounting to Rs.32,40,001/- under Rule 6(3) of the Cenvat Credit Rules, 2004 on account of provision of exempted services and provision of taxable service was confirmed by the Commissioner(Appeals) for the period from 2010-11 to 2013-2014.
2. Briefly stated, the facts of the case are that the appellant, M/s.Mould Equipment Limited, is engaged in the business of manufacture of moulds as well as repair and maintenance and job work services and is registered with the Service Tax as well as the Central Excise department.They are also engaged as job worker by M/s. Hindustan National Glass and Industries Limited (hereinafter referred to as M/s. HNGIL) wherein raw materials received from M/s. HNGIL, after carrying out the process of proof machining and other activities which was classified under Central Excise Tariff i.e. other than raw cast articles of iron, are retuned back to M/s. HNGIL for use in further manufacture of glass bottles by HNGIL.
3. During the period, the Appellant has treated the above process as amounting to manufacture as the excise duty was paid on the finished goods by M/s, HNGIL and thus the appellant was taking the benefit of Notification No. 214/86-CE and no excise duty was paid by the Appellant. Also, the job charges received by the Appellant from M/S HNGIL was exempt from Service Tax vide notification No. 08/2005-ST dated 1st March, 2005 for the period up to 30/06/2012 and under clause (f) of section 66D of the Finance Act, 1994 w.e.f. 1st day of July’2012. The appellant availed Cenvat credit under Cenvat Credit Rules, 2004 on input and input services used in relation to the manufacture of finished goods as well as provision of job work services. In this background, a Show cause notice (SCN) dated 10.09.2015 was issued by the Service tax audit team of the revenue department and the Appellant was asked to pay an amount of Rs. 32,40,001/-being 5%/6% of the exempted turnover under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 for availing common input services used for both provision of taxable service/ manufacture of taxable goods and provision of exempted services of job work.
4. The said SCN culminated into Order-in-Original dated 16/12/2016 wherein the learned Adjudicating authority confirmed the total demand along with imposition of equivalent amount of penalty and interest as applicable. On Appeal filed before the learned Commissioner(Appeals), the Adjudication Order was upheld. Hence, the present appeal before the Tribunal .
5. Shri Ankit Kanodia, learned Chartered Accountant, appeared on behalf of the appellant and Shri Joydip Chattopadhyay, learned Authorized Representative appeared on behalf of the respondent department.
6. The learned Chartered Accountant appearing for the appellant submitted that the appellant has already reversed the total common Cenvat credit of input services by applying proportionate ratio method as per Rule 6(3)(ii) of the CCR, 2004 and has thus reversed an amount of Rs.3,25,737/- as per calculations below and thus there is no question of demanding 5%/6% of exempted turnover for reversal of Cenvat credit.
