Denial of utilization of credit of input services for payment of excise duty on goods manufactured.

PJ/CASE LAW/2016-17/3222

Case- Shri B. Ravichandran, Member (T) PYROTECH WORKSPACE SOLUTIONS PVT. LTD. Versus COMMR. OF C. EX., JAIPUR-II

Citation- 2016 (43) S.T.R. 299 (Tri. - Del.)

Brief Facts-This is an appeal against order dated 19-12-2013 of Commissioner (Appeals-II), Jaipur. The appellants are engaged in the manufacture of industrial furniture liable to Central Excise Duty. They are also engaged in providing various taxable services like maintenance and repair, commissioning and installation etc. They have been availing Cenvat credit of service tax paid on commercial construction service and used such credit for payment of excise duty of industrial furniture. The Department entertained a doubt regarding admissibility of credit on industrial construction service as the said service had no nexus with manufacture and clearance of excisable goods. Accordingly, proceedings were initiated by issue of show cause notice dated 2-8-2010 and resulted in original order dated 16-2-2012. The Original Authority disallowed a credit of Rs. 10,55,318/- and imposed equal penalty on the appellants.

Appelants Contention-The learned Counsel for the appellant submitted
(i) the appellants are manufacturing furniture at their factory and the said furniture are required to be erected/installed at different locations; in some cases such installation is done under turnkey contracts which inter alia includes false ceiling, flooring, tiling and other labour work. Sometimes such work is got done through sub-contractors. The sub-contractors raised service bills along with applicable service tax which is discharged by the appellant;
(b) the credit of input services were related to providing taxable output services. The credit was rightly taken by the appellant. Once the credit is legally available, Rule 3(4) of Cenvat Credit Rules, 2004 allows utilization of such credit either for payment of service tax or excise duty. There is no requirement that credit taken on input services with reference to output services cannot be utilized for payment of Central Excise duty, if the manufacturer and the service provider is one and the same;
(c) the lower authorities have completely misapplied the facts to arrive at the erroneous conclusion. The findings in para 11 of the impugned order has no support in law. The assertion by the learned Commissioner (Appeals) that commercial construction service is not an input service for manufacture of industrial furniture is mis-directed and not relevant to consider the eligibility of the input service of commercial construction in their case. It is an admitted fact that the input services, namely commercial construction service, is used for providing output services as clearly admitted in the show cause notice and in the proceedings before the lower Authorities. The allegation that credit taken on input services which was used for providing output service cannot be utilized for payment of Central Excise duty is unsustainable in terms of the provisions of Cenvat Credit Rules, 2004. The Rules do not provide for anyone to one co-relation between credit legally availed and its utilization.

Respondents Contention-The learned AR reiterated the findings of the lower Authorities and submitted that the credit on commercial construction service is not available to the appellant for the manufacture of industrial furniture.

Reasoning Of Judgement-The admitted facts of the case are that the appellant herein is both a manufacturer and a service provider. They manufactured dutiable industrial furniture and they also render taxable output services like GTA, maintenance and repair service, commissioning and installation service and BAS. On perusal of the show cause notice and orders of the lower authorities, it is clear that the credit on commercial construction service is not sought to be denied on the ground that such credit is not available in terms of Cenvat Credit Rules, 2004. In fact, it has been admitted that the said input service is used for providing output services. Therefore, the objection is on utilization of such credit as available on input service for payment of Central Excise duty on industrial furniture. The reasoning by the lower Authorities is devoid of any legal merit. The eligibility of credit on the input service has not been contested. Once the credit is availed, the use of such credit is governed by Rule 3 of the Cenvat Credit Rules, 2004. Sub-rule (4) of the said Rule stipulates that Cenvat credit may be utilized for payment of any duty of excise on any final product. Here there is no one to one co-relation or condition that credit on input services can be utilized only for discharging tax on output services or Excise Duty on final products cannot be paid using Cenvat credit availed on input services.

Decision- Appeal allowed

Comment- The crux of the case is that once credit is legally availed, Rule 3(4) of Cenvat Credit Rules, 2004 allows its utilization for payment of either Service Tax or excise duty. The said Rule does not provide for one to one co-relation or condition between credit availed on input services and its utilization only for discharging Service Tax and not for paying excise duty. Hence, the impugned order not sustainable.

Prepared By-Ritika Mehta

Comments

PJ/CASE LAW/2016-17/3222

Post a Comment

Query