News Update

India, China hold fresh dialogue for complete disengagement on Western borders: MEAThakur says India is prepared for 2036 OlympicsCBDT substitutes Form in ITR-5EV Revolution: Lessons for India to learn from US and China!London court green-signals auction of luxury apartment of fugitive Nirav ModiGovt consults RBI; finalises borrowing plan for first half of FY 2024-25Gadkari says Farmers’ protest is politically-motivatedVP calls upon women entrepreneurs to be 'Vocal for Local'America offers USD 10 mn bounty for information on ‘Blackcat’ hackers after UnitedHealth gets hitI-T- The order of the ITSC can only be reopened in cases of fraud or misrepresentation: HC8 persons including Hezbollah militants killed in Israeli strike on LebanonI-T - Income so surrendered on account of investment in excess stock during course of survey cannot be brought to tax under deeming provisions of section 69B: ITATMacron pillories EU-South Africa trade deal; calls it ‘really bad’ in BrazilI-T-Power of revision need not be exercised where facts do not reveal any lack of enquiry by AO into relevant issue & when twin requirements of order being erroneous as well as prejudicial to Revenue's interests, are not satisfied: ITATThailand’s Lower House okays Bill to legitimise same-sex marriageI-T -Penalty u/s 271(1)(c) cannot be imposed where an assessee claims deduction u/s 80P while being ineligible therefor, but being under the bona fide impression of being eligible for such benefit : ITATYellen warns China against clean energy dumpingCus - Enhancement of declared value of imported goods is not tenable, where Department adduces no material to show how the enhanced value was computed & where no cogent rationale is made out for rejecting declared value: CESTATMilky Way’s central black hole - Twisted magnetic field observedCus - Assessee has not proved beyond reasonable doubt that goods in question imported under air way bills/bills of entry were in fact filed by him and hence the only natural corollary available to Revenue is confiscation of same: CESTATSmall investors help Trump Media’s valuation skyrocket to USD 13 billionST - When the facts are in the knowledge of department subsequent SCN alleging suppression cannot be issued and entire demand was found beyond normal period of limitation: CESTATFM Nirmala Sitharaman declines to contest LS elections as she has no fundsST - Tripura State Rifles not required to pay Service Tax under heading of Security Services, as it is is not engaged in business of providing security services: CESTATJustice Ritu Raj Awasthi joins as Judicial member of LokpalCX - Clandestine removal alleged based on consumption of raw inputs and heightened electricity usage - Tax demands based on third party statements but without permitting cross examination of deponents; case remanded to allow this exercise: CESTAT
 
CX - Commissioner has no jurisdiction to reallocate CENVAT distributed by ISD - assessee is not entitled to take credit on services mentioned in rule 6(5) which is attributable to trading as during material period it was neither taxable nor exempted: CESTAT

By TIOL News Service

MUMBAI, OCT 24, 2014: THE assessee has manufacturing units located in Maharashtra, Uttaranchal and in Himachal Pradesh . The Head Office is located at Andheri (W), Mumbai. The manufacturing units located at Uttaranchal and Himachal Pradesh did not pay Central Excise duty. The appellant is also engaged in the activity of trading of goods at their Head Office. The other units are manufacturing dutiable as well as exempted goods. The Head Office at Andheri (West) distributed the CENVAT Credit of input services to the units located in Maharashtra at Nerul, Pawane and Patalganga. While doing so the Head Office has distributed credit in proportion of turnover i.e. credit attributable to units exclusively engaged in exempted goods and credit attributable to trading was not distributed. However, CENVAT Credit on input services covered under Rule 6(5) of CCR, 2004 was distributed in full so long as it did not pertain to units exclusively engaged in manufacture of exempted goods or trading.

The period involved is September, 2006 to March, 2010 & January 2011 to March 2012. SCNs were issued inter alia alleging that in respect of services mentioned in Rule 6(5) of CCR, 2004, the ISD could not take 100% credit and distribute it.

The adjudicating authority dis-allowed the credit under Rule 6(5) of CCR, 2004 and redistributed the whole of CENVAT Credit distributed by ISD.

Against this order, the assessee is before the CESTAT.

Revenue is also in appeal against this order on the ground that while re-distributing the credit, the assessee is required to include the turnover of goods got manufactured by the assessee from loan licence units.

There is also another Revenue appeal against an O-in-A and the ground is that in terms of rule 9 of CCR, 2004 the burden of proving that the CENVAT Credit is in respect of input/capital goods and input services lies upon the manufacturer and this condition has not been satisfied by the assessee.

After considering the submissions on the issue of jurisdiction raised by the assessee that the jurisdictional Commissioner cannot challenge the correctness of the credit distributed by the ISD located in a different jurisdiction, the Bench after distinguishing the judgments cited observed -

++ In fact, the issue in this case is that whether the assessee is entitled to take CENVAT credit as per Rule 6(5) of CENVAT Credit Rules, 2004 for specified service as a whole or not. This question is to be examined at the end of the assessee; therefore, the lower authorities are to examine the correctness of the admissible CENVAT credit to assessee.

In the matter of interpretation of rule 6(5) of CCR, 2004, the Bench held -

++ As per the said Rule, there is no bar to avail CENVAT credit on the services covered under Rule 6(5) by a unit who is engaged in the activity of manufacturing of both dutiable as well as exempted goods and engaged in dutiable as well as exempted services. Therefore, we hold that in this case the assessee is entitled to take the CENVAT credit of services referred in Rule 6(5) of CENVAT Credit Rules, 2004 for whole of the credit attributable to dutiable as well as final exempted products and for taxable or exempted services but the assessee is not entitled to take CENVAT credit attributable to the activity of trading as during the relevant time, the trading activity was neither excisable nor an exempted service at all. Therefore, the quantification of inadmissible CENVAT credit is required to be done at the end of adjudicating authority to disallow the CENVAT credit attributable to trading activity.

As to whether the Commissioner has jurisdiction to reallocate the CENVAT credit or not, the Bench observed -

++ We have gone through the show-cause notice wherein the allegation is that the assessee is not entitled to take CENVAT credit referred in under Rule 6 (5) of CENVAT Credit Rules, 2004 as the same are not covered in Rule 7. Therefore we hold that the learned Commissioner has no jurisdiction to reallocate the CENVAT credit to the assessee in question as there was no such allegation in the show-cause notice and he cannot go beyond the allegation in the show-cause notice to decide the issue.

The CESTAT further held that the issue involved is as to whether the assessee is entitled to take CENVAT credit on the services covered under Rule 6(5) or not and which being a debatable issue extended period of limitation is not invokable& so also imposition of penalty.

In fine, the following order was passed by the Bench -

(a) The assessee is entitled to take CENVAT credit on the services covered under Rule 6(5) of the CENVAT Credit Rules, 2004 as prescribed in the manner in the said Rule.

(b) The assessee is not entitled to take CENVAT credit on the services mentioned in Rule 6(5) of the CENVAT Credit Rules, 2004 which is attributable to their trading activity.

(c) The extended period of limitation is not invokable.

(d) The demands pertaining to the extended period of limitation are set aside.

(e) No penalty is warranted.

(f) The matter is remanded back to the adjudicating authority for re-quantification of demands, inadmissible credit on trading activity for the normal period of limitation.

The Appeals were disposed as above.

In passing : In all probability, Round Two would commence shortly…

(See 2014-TIOL-2071-CESTAT-MUM)


POST YOUR COMMENTS
   

AR not Afar by SK Rahman

TIOL Tube Latest

Shri Shailendra Kumar, Trustee, TIOL Trust, giving welcome speech at TIOL Awards 2023




Shri M C Joshi, Former Chairman, CBDT




Address by Shri Buggana Rajendranath, Hon'ble Finance Minister of Andhra Pradesh at TIOL Awards 2023