Case Law Details
Magnam Netlink Private Ltd Vs C.C.E. & S.T (CESTAT Ahmedabad)
The recent decision in Magnam Netlink Pvt. Ltd. Vs C.C.E. & S.T. by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Ahmedabad brings forth crucial insights into the administration of the Cenvat Credit Rules, 2004. The central question of the case pertains to the appellant’s liability to pay an amount equivalent to 6%/7% of the value of exempted services like “Trading”, as stipulated under Rule 6 (3) of the Cenvat Credit Rules, 2004.
In this case, the appellant had availed the cenvat credit on common input services, a portion of which was attributed to exempted services like trading. The dispute emerged when the department argued that the appellant didn’t follow proper procedures for reversing cenvat credit under Rule 6 (3). The tribunal, however, held that the demand under Rule 6 (3) was unsustainable as the appellant had reversed the credit for common input services (attributed to exempted services), following its identification in the EA 2000 audit. The tribunal drew support from a similar ruling in the M/s. Aims Industries Ltd case.
Interestingly, the tribunal decided to remand the matter back to the adjudicating authority, requiring reconsideration of the quantification and correctness of cenvat credit reversal along with the payment of interest.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The issue involved in the present case is that whether the appellant is liable to pay an amount equal to 6%/7% of the value of exempted services viz. “Trading” as per Rule 6 (3) of Cenvat Credit Rules, 2004 for not maintaining separate records nor reversing the cenvat credit @ 6%/7% of the value of exempted services. It is the case of the department that the appellant did not follow the procedures for reversal of cenvat credit as laid down under Rule 6 (3) but on being pointed out by department, reversed the credit on proportionate basis.
2. Shri Saurabh Dixit, Learned counsel appearing on behalf of the Appellant submits that the appellant have taken common credit which is very negligible, and availed by the them during the period April, 2013 to June, 2017. This issue was raised in the EA 2000 audit however, on pointing out by the auditor paid the entire amount of credited along with interest which is recorded in audit report no. 151/2018-19. In this position, the demand of 6%/7% of the value of exempted services will not sustain. He placed reliance on the following decision of this Tribunal:-
- M/s. Aims Industries Ltd – Final Order No. A/10716/2022 dated 22.06.2022 and A/11258/2022 dated 14.10.2022
3. Shri Rajesh Nathan, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order.
4. We have carefully considered the submission made by both sides and perused the records. We find that even though the appellant had initially availed the cenvat credit on the common input services partly of which was attributed to the exempted services i.e. trading activity. However, on pointing out by the audit officer during EA 2000 Audit, the entire credit related to the common input services was reversed along with interest. We are of the view that once the assessee reversed the cenvat credit on the input services attributed to the exempted services, the demand under Rule 6(3) is not sustainable. This issue has been considered by this Tribunal in various judgments including the judgment of M/s. Aims Industries Ltd (Supra) cited by the learned counsel.
4.1 We also find that since in the show cause notice demand was raised @ of 6% /7% and not considered the reversal of cenvat credit, the matter needs to re-considered only for the limited purpose of quantification and correctness of reversal of cenvat credit along with payment of interest.
5. Accordingly, we set aside the impugned order and remand the matter to the adjudicating authority for passing a fresh order after considering the above observation. Appeal is allowed by way of remand to the Adjudicating Authority.
(Pronounced in the open court on 28.06.2023)
