| Article Section | |||||||||||
UTILIZATION OF CENVAT CREDIT |
|||||||||||
|
|||||||||||
UTILIZATION OF CENVAT CREDIT |
|||||||||||
|
|||||||||||
Rule 3(1) of CENVAT Credit Rules, 2004 ('Rules' for short) allows a manufacturer or producer of final products or a provider of output service to take credit of duty/service tax etc., paid on any input or capital goods received in the factory of manufacture of final products or premises of the provider of output service and an input service received by the manufacturer of final products or by the provider of output service. Rule 3(4) provides that the CENVAT Credit may be utilized for the payment of- * Any duty or excise on any final product; or * An amount equal to CENVAT credit taken on input if such inputs are removed as such or after being partially processed; or * An amount equal to the CENVAT credit taken on capital goods if such capital goods are removed as such; or * An amount equal under Rule 16(2) of Central Excise Rules, 2002; or * Service tax on any output service. The credit shall be utilized only to the extent such credit is available on the last day of the month or quarter, as the case may be, for payment of duty or tax relating to that month or quarter as the case may be. The CENVAT credit of the duty, or service tax, paid on the inputs, or input services, used in the manufacture of final products cleared after availing the exemption granted by the Government under Notifications shall be utilized only for payment of duty of final products, in respect of which exemption under the notification is availed of. No credit of the additional duty leviable on final products under Sec. 3(5) of the Customs Tariff Act shall be utilized for payment of service tax on any output service. The CENVAT credit of any duty specified in Rule 3(1) except the National Calamity Contingent duty shall not be utilized for payment of the said National Calamity Contingent duty on goods falling under tariff items 8517 12 10 and 8517 12 90 respectively of the first schedule of the Central Excise Tariff. The CENVAT credit of any duty mentioned in Rule 3(1) other than credit or additional duty of excise leviable under Sec. 85 of the Finance Act, 2005 shall not be utilized for payment of said additional duty of excise on final products. The above are the provisions for utilizing the CENVAT credit. Given the following case laws will further clarify the complications in respect of utilizing the CENVAT Credit: The appellant is recipient of the Goods Transport Agency Service. Rule 3 deals with CENVAT credit; sub rule (4) thereof provides that CENVAT credit may be utilized for payment of, among other things, service tax on any output service vide clause (e). The question is whether the appellant as a recipient of the Goods Transport Agency service can utilize the CENVAT credit for payment of service tax. The appellant is a dealer of excisable goods registered under the Act and by reason of being the person liable to pay freight for the transportation of goods, is the person liable to pay service tax in terms of Rule 2(1)(d) of Service Tax Rules. That being so, read with explanation to Rule 2(p) of the CENVAT Credit Rules, it is clear that the service for which he was liable to service tax, must be treated as an output service by legal fiction and being the legal position, the appellant was entitled to utilize the CENVAT credit for payment of service tax on such service. Education cess was introduced during the year 2004. The appellants have taken credit of the education cess and used the same for paying duties of central excise other than education cess. The tribunal held that this was the mistake happened during the initial days of introduction of education cess. It is true that credit on education cess can be used only for paying education cess on the finished goods. The confirmation of the duty and permitting taking of credit against will be neutral excise especially in the light of the submission that the appellants have paid some of education in later period in PLA as well. The appellants are engaged inter alia in the manufacture of excisable goods. During the period January 2005 to March 2007 they availed CENVAT credit of the service tax paid on certain input services and utilized the same for payment of service tax on Goods Transport Agency service received by them. This was rejected by the Department. The appellants are claiming under the explanation to Rule 2(p) which reads as follows: "Explanation - for removal of doubts, it is hereby declared that if a person is liable for paying service tax does not provide any taxable service or does not manufacture such final products, the service for which he is liable to pay service tax shall be deemed to be the output service" As the appellants were admittedly engaged in the manufacture of goods during the material period they were not entitled to Goods Transport Agency Service as an output service in terms of the above explanation. With the deletion of the above explanation GTA service remains as an input service only. Rule 3(7)(b) of CENVAT Credit Rules, 2004 placing limitation for utilization of credit obtained through education cess paid on inputs has no application in regard to utilization of credit of basic excise duty. Rule 3(4) which related of basic excise duty places no limitation on utilization of such credit. Payment of education cess from basic excise duty credit is permissible. The plant and machinery in Bangalore unit was shifted to Chengalpet in August - September 1994. At that time, input duty credit of Rs.18,35,018/- was lying unutilized in RG 23A Part II account of Bangalore Unit. Input duty credits totaling to about Rs.18 lakhs had, by then, been transferred from the Rajahmundry Unit of the appellants to the Bangalore Unit. Thus the total input duty credit lying unutilized in the MODVAT account of the Bangalore Unit at the time of transfer of credit from that unit to Chengalpet Unit was Rs.37,23,609/- The Chengalpet unit took the credit and utilized it for payment of duty on final product which was asked to be reversed by the Department. The tribunal held that the inputs in question had been duly accounted for to the satisfaction of Commissioner of Central Excise, Bangalore and that it was upon such satisfaction the Commissioner allowed transfer to the MODVAT Credit account of the Chengalpet unit. The case of Revenue is that for utilization of the transferred credit at Chengalpet the inputs should have been physically received in the unit from Bangalore would lose ground. In other words, the Department cannot any longer object to such utilization of the credit by the Chengalpet unit on the strength of Rule 57F(21). CENVAT credit maybe utilized for payment of any duty of excise on any final product. MODVAT credit account is indefeasible. It is not permissible to fragment it so as to restrict it only to particular lines of production. Such an allocation of credit, raw materialwise or final productwise is not permitted by the rule. Nor it is practicable. The Revenue filed this appeal aggrieved by the order of Commissioner (Appeals) on the ground that the Commissioner (Appeals) has not considered the provisions of CENVAT Credit Rule 6(3) and 6(5). It is the submission of the Revenue that the assessee has not maintained separate records for the utilization of the credit taken and the services received by them for exempted and non exempted categories. The provisions of Rule 6(3) © will be applicable and the respondent is entitled to utilize only 20% of the amount of credit that is available to him as a credit. The tribunal held that the Commissioner (Appeals) has correctly come to the conclusion that credit of service tax paid on services enumerated under Rule 6(5) of the CENVAT Credit Rules, 2004 are to be allowed. It can be noticed that Rule 6(5) starts with a non obstante clause 'notwithstanding' which would indicate that the provision of Rule 6(3) are not applicable for the provisions of Rule 6(5) of CNEVAT Credit Rule, 2004. If it is undisputed the service tax credit availed is on the services as mentioned in Rule 6(5), the credit of entire/whole amount of service tax has to be allowed to the respondent. If an assessee is allowed to take eligible credit he should be allowed to utilize the same. Assessee does not provide any service and paid service tax on GTA service received. GTA service in question is to be treated as output service in view of explanation to Rule 2(p) of CENVAT Credit Rules, 2004. Assessee correctly utilized CENVAT credit for discharging tax due on GTA service availed by it. The respondents are engaged in the activity of manufacturer as well as output service providers. In the impugned order, the Commissioner (Appeals) held that the respondents are entitled for CENVAT credit of manufacturing activity for utilization towards payment of service tax. The Revenue challenged these findings. The tribunal held that there is no restriction for utilization of CENVAT credit by manufacturing unit towards payment of service tax as service provider as CBE &C Manual or supplementary instructions. The tribunal found no infirmity in the impugned order and the appeal is dismissed. During an investigation the assessee deposited Rs.7 lakhs (Rs.5 lakhs by way of cash and Rs.2 lakhs by way of reversal of MODVAT credit). Ultimately the dispute got settled and it was found that the assessee has paid Rs.1,10,478/- in excess. It sought the return of the excess amount. In adjudication the Dy. Commissioner ordered that the refund be given by way of credit in the CENVAT credit account of the assessee. The assessee approached the Commissioner (Appeals) . The Commissioner (Appeals) held that the appellants are not in a position to utilize the credit already lying in their CENVAT account and have surrendered the registration certificate. Therefore sanctioning of refund by allowing re-credit in the CENVAT would not be in fair play of justice. The tribunal upheld the order of Commissioner (Appeals).
By: Mr. M. GOVINDARAJAN - January 10, 2009
|
|||||||||||
| |
|||||||||||
