Total Cenvat Credit means Credit of Common Input Service and not of Input Service Exclusively used for Manufacture of Dutiable Product to Calculate Cenvat Credit Reversal: CESTAT [Read Order]

The Bangalore Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the total cenvat credit means credit of common input service and not of input service exclusively used for manufacture of dutiable product to calculate cenvat credit reversal.

At the end of the financial year, final reversals were done and intimated to the department. However, the department issued a show-cause notice stating that the reversals done by the appellant was not in accordance with law and the amount reversed was much less than what had to be reversed as per Rule 6(3A) of CCR, 2004. On adjudication, an amount of Rs.24,68,32,910/- was confirmed along with interest and penalty.

The counsel on behalf of the appellant submitted that Rule 6(3A) of the CCR, 2004 is applicable only to the inputs and input services used in the manufacture of dutiable goods and exempted goods; but the department has taken the entire input service credit which has been availed by the appellant. It was submitted that the Rules envisage reversal of the credit that is only utilised for the manufacture of exempted goods.

Therefore, the intention has always been to restrict cenvat credit only to the extent that is used in exempted products/services. Further, reliance is placed on Circular D.O.F. No.334/8/2016-TRU dated 29.2.2016 where it has been stated that as per the formula, the full credit of inputs/input services used exclusively in final products excluding exempted goods will be available to the appellant.

The Authorised Representative on behalf of the Revenue submitted that reversals as per the formula as discussed in the impugned order was correct and the amendment made at a later date not applicable to the period of dispute.

A Two-Member Bench comprising PA Augustian, Judicial Member and R Bhagya Devi, Technical Member observed that “The Commissioner in the impugned order rejects the appellant’s contention that the total credit here refers to only the common services which are attributable to dutiable and exempted goods. This issue now stands settled in view of the amendments made to the CCR 2004 vide Notification No. 13/2016-C.E. (NT) dated 01.03.2016 wherein it has been clarified that the formula refers to the common inputs/input services for ascertaining the credit to be reversed on exempted products.”

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