Manufacturer as well as service provider need not to maintain separate Cenvat credit account for payment of Excise duty / Service tax

[Vijay Chitte]

Many of the industries are manufacturer of excisable goods and also providing taxable service. As far as manufacture concern they can discharged his Central excise duty liability from his Cenvat credit accounts as per cenvat credit rules 3(4). But what happen, if the manufacturer also providing taxable service; in this situation question arise whether manufacturer have to maintain separate Cenvat credit accounts for discharge the service tax liability of his output services? Or he can discharged his service tax liability from his common cenvat credit account?

Let's refer the Cenvat credit rules

Rule 3 (4) of Cenvat credit Rules 2004 provides Cenvat credit may be utilized for payment of ;

          a) any duty of excise on any final product; or

          b) ************

          c) ************

          d) ************

          e) service tax on any output service

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. Rules 3(1) enables a manufacturer or a provider of taxable service to take of specified duties and utilized them to discharged Central Excise 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. Thus, rules permit taking of cenvat credit under common pool and permit use of the credit from the common pool for different purposes and no where it is specified that if an assessee is engaged in both the activity i.e. manufacturing and providing output service, the assessee has to maintain separate cenvat credit accounts. He can discharged his both the liability from his common cenvat credit account.

This view has been held in M/s. Lakshmi Technology and Engineering Indistries Ltd. V/s. CCE, Coimbatore [2011 (2) TMI 1275 - CESTAT, CHENNAI ] In this case assessee is manufacturer of excisable goods and also providing taxable service. The assessee 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 output service rendered under the category of “Renting of Immovable Property” under section 65(105)(zzzz) of Finance Act, 1994. In this case “Committe of the commissioners” was of the view that the order of the Commissioners (Appeals) allowing a manufacturer to pay service tax from the CENVAT account was wrong. So the revenue filed appeal before the CESTAT.

The tribunal has to give some elementary findings in rule 3(4) of CENVAT Credit Rules 2004 and dismiss the revenue appeal to held that, manufacture 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 service and utilize the credit from all these sources for the purpose of service tax. As per rule 3(4) of cenvat credit rule 2004 there is no restriction placed to the effect that credit account should be maintained for use for manufacture of excisable goods and use for providing taxable service, therefore the utilization of credit taken by them is valid.

Similar case in M/s. Intrumentation Ltd V/s. CCE, Jaipur [2011-TMI-205279-CESTAT, NEW DELHI] also held that as per provision of Cenvat credi rules, no where it is specified that the assessee has to maintain separate cenvat credit accounts for manufacturing activity and output service. Therefore the availing of credit or its utilization cannot be denied and grated waiver of entire demand of cenvat credit along with interest and penalty and stay demand during pendancy of the appeal.

Same view has been also held in Vinayak Textile Mills V/s. Commissioners of C. Ex. Ludhiana [2010-TMI-205694-CESTAT, NEW DELHI] that the assessee is manufacturer and also liable for payment of service tax on GTA as a recipient of service, he paid his GTA service tax liability partly from Cenvat account and party from cash and argued that Cenvat credit taken under Rule 3 of Cenvat credit Rules can be utilized for the purposes mentioned in the Rule 3(4) of Cenvat credit rules which includes payment of service tax for the services provided by the recipient. In respect of input services of GTA utilized in connection with receipt of input, they are deemed provider of the said service and therefor they have rightly utilized the credit. There is no specific bar in Rule 3(4) of Cenvat credit Rules in utilizing the credit for payment of service tax payable by the assessee as a deemed service provider [this decision is valid up to 01-03-2008 for the category of GTA only, as per rule 2(p) of Cenvat credit rule “Output service” does not include GTA service w.e.01-03-2008].

Conclusion:-
It is quite clear that if the assessee are manufacturer as well as provider of taxable service need not to maintain separate cenvat credit account as there is no specific provision in cenvat credit rules 3(4). In case, the department really does not want loose the revenue on this account, department has to make specific provision in Cenvat credit rules 2004 to maintain separate cenvat credit account for manufacturer as well as provider of taxable service. Till, the specific provision in the said rule, enjoy the benefit on utilization of cenvat under cenvat credit rules under common pool.