TMI Blog2019 (1) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... , in discharging the service tax liability for that month. Whether Overall utilization of cenvat credit in a financial year ought to be taken into account, for applying the limit of 20% prescribed under Rule 6(3)(c) of the Cenvat Credit Rules,2004 instead of utilisation on month to month basis? - Held that:- On a plain reading of the said provision, it is clear that in case of provider of output service who does not comply with Sub9 rule(2) of Rule 6 of Cenvat Credit Rules, 2004, the procedure required to be followed is prescribed at sub-rule (3) of Rule 6 of CCR, 2004; and under the said rule a restriction on utilization of the amount of Cenvat Credit available is prescribed and it is limited to 20% in discharging the tax liability on the output service. There has been no other provision under the Cenvat Credit Rules about the method, manner or frequency of payment of service tax on taxable output service and also utilisation of cenvat credit. Therefore, the point of time of its utilization and the restriction on utilization of credit should be read harmoniously along with Rules framed under Finance Act 1994, so far as it relates to discharge of service tax liability. Readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have utilized credit in excess of 20% of the service tax paid in contravention of Rule 6(3)(c)of the Cenvat Credit Rules 2004, demand notices were issued for recovery of credit of ₹12.7crores and ₹ 42.4 crores for the period from October 2004 to March 2006 and April 2006 to March 2008, respectively with interest and penalty. The Ld. Commissioner after analyzing the issues held that the International roaming charges and Interconnect user charges became taxable w.e.f. 1.6.2007, being covered under the amended definition of Telecom service; consequently, he dropped the demand for subsequent period; also, he has observed that the credit taken on capital goods used both for taxable as well as exempted services cannot be faulted with as the same were not exclusively used for exempted services, accordingly, he reduced the demand to ₹ 4,08,19,336/- and imposed penalty of equal amount under Rule 15(4) of the Cenvat Credit Rules, 2004 read with Section 78 of the Finance Act, 1994; also imposed penalty under Section 77 of the Finance Act, 1994.Aggrieved by the said order, the present appeal. 3. At the outset, Shri S.S. Gupta, Ld. Chartered Accountant for the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said cenvat credit rules to allow credit of input service for rendering exempted output service as per Rule 3(3) of said rules; besides Rule 3(5) of cenvat credit Rules provided for utilisation of credit to the extent of 35% of service tax liability was inserted by Notification number 5/2003 dated 14.5.2003. It is his contention that if a inferences is drawn that after utilizing cenvat credit to the extent of 35% of service tax liability, balance credit, if any, would accumulate, this would be against the mandate of the provision Rule 3(3) of Cenvat Credit Rules, 2002. It is apparently a legislation to improve Cenvat/PLA ratio. It may also so happen that the credit utilisation is hundred percent of the amount of credit availed. But to take an inference that balance credit with respect to exempted services/goods taken in a month could accumulate would definitely result into discrimination with other assessees who maintain separate accounts and availed cenvat credit only with respect to dutiable goods or taxable output services. He has submitted that under the Cenvat Credit Rules, 2004 till the amendment brought by notification number 10/2008-CE (NT), there was no provision for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of CCE, Bolpur Vs. Ratan Melting and Wire Industries 2008 (231) ELT 22 (SC). He further submits that since the appellant had utilized excess cenvat credit amount, such utilization is irregular, and since it is not disclosed in their monthly Returns, hence extended period is applicable. In support, he has referred to the judgment of Hon ble Rajastan High Court in the case of Vodafone Digilink Ltd. Vs. CCE, Jaipur-II 2013 (29) STR 229(Raj.) It is his contention that therefore, the excess credit and interest are required to be recovered for excess utilization which otherwise not admissible to them to be utilized in the same month. In support, he has referred to the judgment of this Tribunal in the case of D.B.C. Port Logistics Ltd. Vs. commissioner of Central Excise, Raigad 2017 (48) STR 494 (Tri.-Mumbai). 5. Heard both sides and perused the records. 6. Undisputedly, for the period prior to 01.6.2007 the appellant had provided exempted services, namely International roaming charges and interconnect user charges which were exempted from payment of service tax. Since they have used common input services, in providing both taxable as well as exempted services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice shall utilize credit only to extent of an amount not exceeding twenty percent of the amount of service tax payable on taxable output service. Explanation I- The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II- If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT credit wrongly taken; 9. On a plain reading of the said provision, it is clear that in case of provider of output service who does not comply with Sub9 rule(2) of Rule 6 of Cenvat Credit Rules, 2004, the procedure required to be followed is prescribed at sub-rule (3) of Rule 6 of CCR, 2004; and under the said rule a restriction on utilization of the amount of Cenvat Credit available is prescribed and it is limited to 20% in discharging the tax liability on the output service. There has been no other provision under the Cenvat Credit Rules about the method, manner or frequency of payment of service tax on taxable output service and also utilisation of cenva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of Rule 6 would not come into play. However, an assessee cannot be permitted to accumulate the limit of 20% for five months CENVAT credit and debit at one go the 100% credit in discharging their liability. We find that the observation made in Vijayanand Roadlines Ltd case (supra) without taking note of the statutory provisions namely, Rule 6(1) of the Service Tax Rules, 1994, hence, per-incurium and cannot be considered as binding precedent. Therefore, subsequent judgments relying on the said precedent also cannot be considered as a binding precedent. 12. However, we are of the opinion that notwithstanding the excess use of credit, the consequence cannot lead to recovery of the credit being availed as per law and admissible to the appellant. This question is answered by the Tribunal in the case of D.B.C. Port Logistics Ltd. (supra). Considering the fact of excess utilization of credit this Tribunal observed that the assessee-appellant at best could be liable to pay interest on the excess amount of CENVAT credit utilized in discharging the service tax in lieu of cash. The aforesaid observation in our view is more or less akin to eligibility of credit on capital goods spre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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