Customs, Excise and Gold Tribunal - Delhi
Cce vs Nahar Industrial Enterprises Ltd. on 7 March, 2007
Equivalent citations: 2007[7]S.T.R.26, [2007]10STT117
ORDER
S.S. Kang, Vice President
1. The Revenue filed this appeal against the impugned order passed by the Commissioner (Appeals).
2. The respondents are engaged in the activity of manufacture as well as they are 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 is challenging these finding on the following grounds:
(i) The Cenvat Credit Rules, 2004 provide that the output service provider is eligible to take credit of service tax paid on input/capital goods used in providing service. In this case the actual service provider is the transporter and the party is treated as the service provider for the limited purpose of discharging the Service Tax liability under Section 68(2) of the Finance Act, 1994. As such the party not being the service provider is not entitled to avail credit, which can be availed by the actual service provider only.
(ii) The party is having a dual role. They are manufacturer as well as the service provider by virtue of the deeming provisions of Section 68(2) of the Act read with Rule 2(d) of the Service Tax Rules, 1994. Though Cenvat Credit Rules, 2004 are applicable to both the categories but the definitions of 'input', 'capital goods' and 'input service' are different for each of them. The output service provider is eligible to take credit of service tax paid on input/capital goods 'used in providing service' and that the goods which are inputs/capital goods for the manufacturer are not input/capital goods for the service provider and vice versa. As such, the Cenvat credit of manufacturing amount cannot be used for discharging service tax liability on deemed service provider.
3. I find that as per Cenvat Credit Rules 2004 output service means any taxable service provided by the provider of service to a customer, client and a person liable to pay Service Tax and provider of taxable service include a person liable for paying Service Tax. Further, I find that as per CBEC Excise Manual of supplementary instructions where certain restrictions were imposed for payment of Cenvat credit. Para 24.2 is reproduced below:
Utilisation of credit.
The Cenvat credit may be utilized for payment of:
(a) any duty of excise on any final products; or
(b) an amount equal to CENVAT credit taken on inputs if such inputs are removed as such or after being partially processed, or
(c) an amount equal to the CENVAT credit taken of capital goods if such capital goods are removed as such; or
(d) an amount under Sub-rule (2) of Rule 16 of Central Excise Rules, 2002; or
(e) service tax on any output service;
24.2 Restrictions on utilization of credit.
There are certain restrictions on utilization of Cenvat credit of different rules. The credit of AED (TTA), NCCD, Additional Duty of Excise on Tea Education Cess and additional duty of excise levied under Clause 85 of Finance Act, 2005 can only be utilized only for the payment of such duties. Vide Section 88 of Finance (No. 2) Act, 2004, it has been provided that the credit of AED(GSI) paid on or after 1.4.2000 shall be allowed to be utilized for the payment of any other duty. However, prior to this, the duty credit of AED(GSI) if taken can be utilized only for the payment of AED(GSI) as per relevant provisions applicable at that time. Finance Bill, 2005 has made certain changes in Clause 88 of Finance (No. 2) Act, 2004 to provide for recovery of AED(GSI) paid before 1st April, 2000 and wrongly availed for payment of Cenvat duty and interest thereon. The scheme also provides for payment of aforesaid amount in 36 equated monthly instalments {for further details, Clause 124 of Finance Bill, 2005 may be referred to}. It has however, been provided that the credit of the Education Cess on excisable goods and the Education Cess on taxable service can be utilized either for payment of the Education Cess on excisable goods or for the payment of the Education Cess on taxable services.
The credit of additional duty leviable under Sub-section (5) of Section 3 of Customs tariff Act, 1975 cannot be utilized for payment of service tax on any output service. Further, the credit of any other duty cannot be utilized for the payment of duty levied under Clause 85 of Finance Bill 2005 {refer Notification No. 13/2005-CE(NT) dated 1.3.2005} These is no restriction on utilization of credit of duties other than mentioned above.
4. As per the Cenvat Credit Rules and as per the Manual, there is no restriction for utilization of Cenvat credit by the manufacturing unit towards payment of Service Tax as service tax provider. In these circumstances, I find no infirmity in the impugned order, the appeal is dismissed.
(Dictated & pronounced in open Court)