CENVAT Credit on Common Inputs/Input Services cannot be denied Even If Assessee is Rendering Exempted Services: CESTAT [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the CENVAT credit on common inputs/input services cannot be denied to an assessee who is rendering exempted services.

The assessee, M/s Agrawal Metal Works Pvt. Ltd has been manufacturing goods on job work basis and has been clearing them without paying duty as per the Notification No. 214/86-CE dated 25.03.1986. the department has denied the CENVAT Credit on the ground that the appellant was rendering an exemption service when it was manufacturing dutiable goods.

Justice Dilip Gupta, President and Mr. P.V. Subba Rao, Member (Technical) observed that “Having accepted the excise returns claiming the process to be manufacture and knowing that the appellant was claiming the exemption notification from Excise duty, Revenue cannot at the same time take a stand that the processes amount to rendering a service and that such service was an exempted service. If Revenue was of the opinion that it’s original position was not correct and no manufacture was involved at all in the process undertaken by the appellant it should have brought out cogent reasons for holding so. Therefore, there is no basis for the allegation in the show cause notice that the appellant was rendering an exemption service when it was manufacturing dutiable goods.”

Finding that the demand has been made under Rule 6 (3) of CCR, 2004, the Tribunal held that “It has been held by the Hon’ble High Court of Andhra Pradesh and Telangana in the case of Tiara Advertising versus Union of India10 that the various options under Rule 6 are options given to the assessee and the Revenue cannot choose one of the options and force it upon the assessee. Even if the assessee is rendering exempted services or manufacturing exempted goods and using common input services no demand can be sustained under Rule 6 (3) as this is only one of its options available to assessee to fulfill its objection.”

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