Clearance as such of Inputs - Reversal of Input Service Credit-whether required

PJ/Case Laws/2011-12/1523

Case: COMMISSIONER OF C. EX., CHANDIGARH-I Versus PUNJAB STEELS

Citation: 2010 (260) E.L.T. 521 (P & H)

Brief Facts-cum-Issue:- Clearance as such of Inputs - Whether credit of input service availed at the time of receipt of inputs is required to be reversed at the time of clearance of inputs as such when the said service tax credit is in respect of or related to such inputs?

Appellant’s Contention:- Revenue submitted that once the assessee had reversed the cenvat credit availed of on the goods purchased by him, which were brought in the factory but were disposed of without use or consumption, he was duty bound to reverse even the input credit availed of on account of service tax in respect of the transportation of goods. He referred to the provisions of Rule 3(5) of the Rules to submit that once the inputs or capital goods, on which cenvat credit had been taken are removed as such from the factory, he is required to reverse the credit availed of to that extent even of service tax paid for availing transport services. Reliance was placed upon Rule 5 of the Rules, which deals with refund of cenvat credit stating therein that when an assessee is entitled to refund of the tax paid on inputs or input service, it is even bound to reverse the credit taken with respect to both things and cannot retain the benefit with regard to the input service while reversing the same with regard to excise duty of inputs.

Respondent’s Contention:- Assessee submitted that there is material difference in the language used by the rule-making authority in Rule 3(5) and Rule 5 of the Rules. Rule 3(5) only talks about reversal of cenvat credit on inputs or capital goods, whereas Rule 5 talks about cenvat credit on input or input service. He further referred to Rule 2(k) and (l) of the Rules to show that ‘input’ and ‘input service’ have been separately defined under the Rules, where the ‘input’ means certain materials, whereas the input service’ means the services availed of. The submission is that once there is no provision in the Rules for reversal of the credit taken on account of input service merely on analogy, the revenue cannot direct the assessee to reverse the credit.

Reasoning of Judgment:- The High Court noted that the Tribunal had reversed the orders passed by the lower authorities with the following observations and relying upon its earlier order passed in Chitrakoot Steel & Power Pvt. Ltd. v. Commissioner of Central Excise [2008 (10) S.T.R. 118 (Tri. - Chennai)].

It has been specifically mentioned in the memo of appeal by the Revenue that no appeal was preferred by it against the judgment relied upon by the Tribunal.

On merits, the High Court finds that the view as expressed by the Tribunal is strictly in conformity with the Rules. Rule 2(k) of the Rules defines ‘input’, whereas Rule 2(l) defines ‘input service’, meaning thereby both the terms have been defined independently. Rule 3 defines the term ‘Cenvat credit’, which includes duty paid under various enactments and also the service tax leviable under Section 66 of the Finance Act, 1994. Rule 3(5) of the Rules only talks about the Cenvat credit taken on inputs or capital goods. It does not refer to the Cenvat on input service, whereas Rule 5, on which reliance is sought to be placed by the Revenue, specifically talks about the Cenvat credit on any input or input service used in the manufacture of final product. This rule pertains to refund in case of exports, which stands altogether on different footings. Once the rule-making authority has defined the terms specifically and used the same in different provisions consciously, the argument of learned counsel for the Revenue that merely by analogy even if in one provision both the terms have been used, the same should be read in the other provision as well, where it has not been specifically mentioned, has no legs to stand, as the tax cannot be levied merely by inference or presumption. It is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. Words cannot be added or substituted so as to give a particular meaning. Reference can be made to the observations of a Constitution Bench of Hon’ble the Supreme Court in Mathuram Agrwal v. State of Madhya Pradesh, (1999) 8 SCC 667.

Decision:- Appeal dismissed.

Comments

PJ/Case Laws/2011-12/1523

Post a Comment

Query