The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed excise duty demand on non-maintenance of separate account for input services for final exempted service.
In the course of their manufacturing, the appellant, M/s. Super Smelters Limited, brought coal, pig iron etc. They availed cenvat credit as their inputs were used in or in relation to manufacture of their final products on which duty was paid at the time of clearance of the same. The appellant was availing cenvat credit on inputs as well as input services such as Survey Fees, Professional charges, Sampling & Analysis Charges, Commission Charges, Security Charges etc.
The allegation against the appellant is that in the guise of removal of inputs as such, the appellant was engaged in rendering of services namely, ‘Trading of Goods’, which service was exempt as per the explanation to Rule 2(e) of the Cenvat credit Rules, 2004 (CCR). The appellant was not maintaining separate accounts in respect of the credit attributable to taxable and exempted trading services under rule 6(1) of CCR Rules.
The contention of the appellant is that the appellant is manufacturing dutiable goods paying duty thereon. Some of the inputs they have removed as such on reversal of cenvat credit. In those circumstances, the proceedings against the appellant are not sustainable. It was further submitted that although they have reversed proportionate cenvat credit on input services availed by them along with interest, but the same was not required to be reversed by them.
On the other hand, the Authorized Representative for the department contended that the appellant is engaged in activity of trading of coal and the said activity during the impugned period was declared as exempted service and the appellant is not maintaining separate account for providing dutiable as well as exempted services, in those circumstances, the appellant is liable to pay 6%/10% of the value of the exempted service provided by them.
A Two-Member Bench comprising Ashok Jindal, Judicial Member and K Anpazhakan, Technical Member observed that “we hold that the demand on account of non-maintenance of separate account for input or input services for final exempted service does not arise and the reversal of cenvat credit on input and proportionate credit on input service is sufficient to meet the ends of justice.”
The Bench also held that the appellant is required to reverse proportionate cenvat credit on inputs cleared as such and proportionate input services used for providing trading activities i.e. trading of coal, therefore, there is no requirement of payment of 6%/10% of the value of trading activity provided by the appellant.
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