Customs, Excise and Gold Tribunal - Tamil Nadu
Chitrakoot Steel And Power Pvt. Ltd. vs Commissioner Of Central Excise on 29 November, 2007
Equivalent citations: 2008(125)ECC188, 2008(151)ECR188(TRI.-CHENNAI), 2008[10]S.T.R.118
ORDER P. Karthikeyan, Member (T)
1. After hearing both sides on the stay application, the requirement of pre-deposit is waived and the appeal itself is taken up for disposal.
2. In the impugned order, the Commissioner (Appeals) has sustained demand of service tax of Rs. 4,40,536/- and vacated a penalty of Rs. 1 lakh imposed on the appellants. After going through the case records and listening to the arguments of both sides, it is seen that M.s. Chitrakoot Steel & Power Pvt. Ltd., the appellant herein, had received consignments of iron ore during the period June, 2006 to October, 2006 and had availed service tax under the category "Goods Transport Agency". Some of the consignments of iron ore received were found to be not upto the mark and the appellants returned back the same. However, the credit of service tax and education cess availed on the rejected quantity of 4,471 MTs was not reversed. After due process of law, the Assistant Commissioner has demanded the impugned credit under Rule 14 of the CENVAT Credit Rules read with Section 11A of the Central Excise Act, 1944.
3. Arguing the appeal, the learned Counsel submitted that an assessee is not required to reverse the credit availed or pay back the same when any inputs in relation to the receipt of which service tax was availed are returned back and not used in the manufacture of final products or output service. According to him, Sub-rule (5) of Rule 3 of the CENVAT Credit Rules, 2004 provided for payment of an amount to the department equal to the credit availed in respect of any inputs or capital goods when they are removed as such from the factory of the assessee. There is no similar requirement in respect of service tax associated with the return of input goods or capital goods. He also submitted that Rule 14 of the CENVAT Credit Rules provided for recovery of CENVAT credit taken or utilised wrongly. The appellants had not taken or utilised the credit wrongly. The appellants had validly availed the credit on receipt of the inputs. On return of the same to the supplier, similar amount of service tax accrued to the Government under the GTA service. He has also relied on DOF No. 334/1/2007-TRU dated 28.2.2007 addressed to the Commissioners and Chief Commissioners wherein, it was clarified as follows:
New Sub-rules (3) & (4) have been inserted in Rule 11 to provide that when a person opts for exemption from whole of duty (in case of conditional notification) or where a product becomes exempted absolutely, in such cases, the CENVAT credit taken on inputs lying in stock, or in process or contained in the final product lying in stock should be reversed. Similar provision has been made in respect of cases wherein taxable service becomes exempted. However, no reversal of credit of input services is required to be made in such cases.
This clarification amply supported the argument that the appellants are not required to pay back the credit availed under GTA service for transport of inputs into the factory which were found to be sub-standard and returned to the supplier.
4. Learned SDR defends the impugned order and states that since the inputs were returned and not used in the manufacture of final products, service tax credit associated with receipt of such inputs is liable to be denied/recovered.
5. On a careful study of the statutory provisions, it is seen that when the credit-availed inputs or capital goods are removed from the factory of the assessee, Sub-rule (5) of Rule 3 of the CENVAT Credit Rules, 2004 provides for recovery of equal amount of credit. There is no such provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory. Moreover, Rule 14 of the CENVAT Credit Rules, 2004 provides for recovery of CENVAT credit availed or utilised wrongly. In the instant case, the appellants had taken the credit correctly in terms of the statutory provisions. No provision exists in the Finance Act, 1994, which would render utilisation of such credit erroneous for the reason that some of the inputs, transport of which yielded GTA service tax credit are returned as not suitable. The credit availed is anyway used to pay duty on the finished goods. In the circumstances, I find that the impugned order sustaining the demand of service tax and education cess to be not sustainable and accordingly vacate the same.
6. The appeal is allowed. Stay petition also gets disposed of.
(Operative portion of the order was pronounced in open court on 29.11.2007)