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ST - Both CX and ST registration are taken by same legal entity, therefore, single CENVAT Credit account can be maintained: CESTAT

By TIOL News Service

MUMBAI, MAR 17, 2017: THE appellants are manufacturers and are also engaged in providing installation and commissioning services. Furthermore, on Renting of immovable property services, the appellants paid Service Tax using CENVAT Credit available to them as manufacturers.

A notice was issued to the appellant alleging that it was incorrect to utilize the CENVAT Credit earned on manufacturing activity for payment of Service Tax liability. Nonetheless,the SCN did not cite any rule, which infraction was committed by the appellant.

The demand was confirmed by the lower authorities and, therefore, the appellant is before the CESTAT.

None appeared for the appellants.

After hearing the AR, the Bench observed thus –

++ The O-in-O relied on Rule 3 (1) and Rule 3 (4) of the CCR, 2004 and held that the manufacturer cannot use credit availed to discharge Service Tax liability as Service Tax provider in absence of any nexus. I find that there is no such requirement for a person to keep separate CENVAT Credit accounts for manufacturing and service activities. Rule 3(1) of the Cenvat Credit Rules provides that a person can avail credit in respect of the manufacturing activity as well as in respect of the activities of providing services. This is a common pool and no different pool for manufacturing and service related activities. Rule 3(4) of the Cenvat Credit Rules prescribes that such credit can be used for payment of excise duty or for Service Tax on any output services. I find that there is no such condition that the CENVAT Credit earned under Rule 3 (1) of the Cenvat Credit Rules can be used for ‘X' purposes and not for ‘Y' purposes.

++ The second issue raised is that the appellants are registered separately as manufacturer and service provider. As a result, there are two distinct different activities. Credit earned by one entity cannot be used by another entity. It is observed that both Central Excise registration and Service Tax registration are taken by same legal entity, therefore, despite two different registrations, a single CENVAT Credit account can be maintained.

Holding that the demand cannot be sustained, the appeal was allowed.

In passing: Also see Graphite India Ltd - 2017-TIOL-865-CESTAT-MUM.

(See 2017-TIOL-866-CESTAT-MUM)


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