The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Delhi Bench while granting relief to M/s National Steel & Agro Industries Limited (NSAIL) ruled that the Rule 6(3A) Formula can be used to only proportionately divide the credit taken on common input services, deny credit attributable to the exempted service.
The appellant, NSAIL manufactures CR coils, CR galvanized sheets, CR galvanized color coated coils, etc., falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985, and has been discharging Central Excise duty on the manufactured goods. The appellant also trades in similar sheets. The appellant avails CENVAT credit of duty paid on inputs and service tax paid on input services under the provisions of CENVAT Credit Rules, 2004.
The appellant has taken no credit on inputs or input services used exclusively for exempted services and had taken credit only on the inputs and input services used in manufacture of dutiable goods.
The only dispute is regarding the credit on common input services used in their headquarters which was transferred to the field units through ISD invoices. This credit cannot be attributed wholly to either the dutiable goods manufactured or the exempted service rendered viz., trading. This should therefore, be apportioned.
The adjudicating authority took the total credit taken (including credit taken on inputs and input services used exclusively for manufacture of dutiable goods) to calculate the amount of CENVAT credit.
The coram headed by President Justice Dilip Gupta ruled that the appellant has followed Rule 6(2) and has not taken any CENVAT credit on the input services which were used exclusively for providing exempted services, the formula under Rule 6(3A) can only be used to only proportionately divide the credit taken on common input services and deny credit to the extent it is attributable to the exempted service viz., trading during the periods relevant to both appeals, viz., 2015-16 and April 2016 to June 2017.
The CESTAT held that The adjudicating authority has erred in taking the total turnover of traded goods as the value of trading service instead of following Explanation 1(c) to Rule 6 to calculate the value of trading service; and for the periods covered in both appeals, the adjudicating authority has erred in reckoning the total credit taken instead of credit on common input services in calculating the amount of credit required to be reversed.
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