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ST – One-to-one correlation has been scrapped – credit can be utilized for payment of duty or service tax: CESTAT

2019-TIOL-2049-CESTAT-DEL

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
COURT NO. II

Appeal No. ST/52095/2018-SMC

Arising out of Order-in-Appeal No. OIA-BHO-EXCUS-001-APP-036-18-19, Dated: 20.04.2018
Passed by Commissioner Of CGST and Central Excise-Gwalior

Date of Hearing: 07.03.2019
Date of Decision: 07.03.2019

VECTUS INDUSTRIES LTD

Vs

CENTRAL EXCISE AND SERVICE TAX
GWALIOR

Appellant Rep by: Shri Vishal Kumar & Ms Krtika Kapoor, Advs.
Respondent Rep by:
 Shri K Poddar, DR

CORAM: Anil Choudhary, Member (J)

ST – The assessee-company manufactures plastic storage tanks and has factories at various locations and depots – Its head office is located in UP & has registered its factory office at Gwalior as the registered office for centralized registration under Service Tax – The assessee developed its brand and it allowed the user of such brand and their expertise to other industries also manufacturing plastic storage tanks by providing sales promotion services by undertaking various activities by the Noida head office such as dealer meetings, seminars for sales executives, data collection and analysis for sales promotion – Hence it received various input services for providing output service of BAS such as GTA, rent a cab service, manpower service , legal service & renting of immovable property – The assessee availed credit of all these services at their centralised registration office at Gwalior & paid service tax for output service of BAS rendered by the head office for the relevant period – Upon audit, it was noted that most of the invoices in respect of which credit had been taken were in respect of VPN connection/ telephone service/networking which cannot be considered as being independently used for BAS output service provided by the assessee which is a small part and of their total business – The Revenue further opined that the assessee did not provide BAS but received various input services as earlier being received – It was also observed that various input services were used at various branches & depots located at different placed – Hence SCN was issued proposing reveral of credit, with interest & imposition of penalty – Such proposals were confirmed upon adjudication & upheld on appeal – Hence the present appeal by the assessee.

Held: As per the provisions of Rule 3(1) of CCR 2004, the producer of final products or provider of output service is entitled to avail credit of all duty of Excise or Service Tax paid & which relate to the business of either manufacture or providing of output service – Also, Rule 3(4) provides the manner of utilization of credit once taken – It provides that such credit can be utilized for payment of duty for any final product or payment of service tax on any output service – Thus the scheme of one-to-one correlation has been scrapped – Hence the SCN is mis-conceived & is not sustainable: CESTAT

Assessee’s appeal allowed

FINAL ORDER NO. 50350/2019

Per: Anil Choudhary:

1. Heard the parties. The issue in this appeal is whether the show cause notice dated 31st March, 2017 objecting to utilization of cenvat credit on various input services for payment of output service tax liability for BAS, whether the same is maintainable.

2. The brief facts are that appellant Vectus Industry Ltd is a manufacturer of plastic storage tanks having factories at various locations and depot for sales about 13 in number. They have their head office at Noida, UP. They have registered their factory office at Gwalior as the registered office for centralized registration under the provisions of Service Tax. The appellant have developed their brand and from the facts on record it appears that they have allowed the user of such brand and their expertise to other industries also manufacturing plastic storage tanks by providing sales promotion services by undertaking various activities by the Noida head-office in the nature of dealer meetings, seminars for sales executives, data collection and analysis for sales promotion etc. Accordingly they received various input services for providing the output service of BAS namely GTA, rent a cab service, manpower service , legal service, rent of immovable property etc. The appellant have taken cenvat credit of all these services at their centralised registration office at Gwalior and have also discharged the service tax for the output service of BAS rendered by the head office, amounting to Rs. 5,08,846/- relating to the period June, 2013 to September, 2014.

3. In the course of audit it was observed that appellant having centralized registration at their Gwalior office have paid Service Tax on various services as herein above mentioned, being input services and have paid service tax for output service for BAS, it further appear to the Revenue that most of the invoices in respect of a which input services credit have been taken are in respect of VPN connection/ telephone service/ networking which cannot be considered as being independently used for BAS-output service provided by the appellant which is a small part and of their total business. It further appeared that the appellant have not provided any BAS after March, 2015 but are receiving various input services as earlier being received. It was also said that various input services have been used at their various branches/ factories/ depot located at different places. Accordingly, the show cause notice proposed to demand the Service Tax utilized for payment for output tax of BAS of Rs. 5,08,846/- along with interest and penalty.

4. The said show cause notice was adjudicated on contest and the proposed demand confirmed along with equal amount of penalty. Being aggrieved the appellant have preferred appeal before Commissioner (Appeals) who have been pleased to dismiss the appeal.

5. Having considered the rival contentions and the facts on record I find that under the provisions of Rule 3 (1) of CCR 2004 producer of final products or a provider of output service is entitled to take credit of all duty of excise and service tax etc, paid by him which relate to the business of either manufacture or providing of output service. Further Rule 3 sub-rule 4 provides the manner of utilization of the cenvat credit once taken. It is provided that such cenvat credit once taken can be utilized for payment for duty for any final product or payment of service tax on any output service. Thus, the scheme of one to one co-relation has been done away with, under the Cenvat Credit Rules, 2004. In this view of the matter, I hold that the show cause notice is misconceived and not maintainable.

6. Accordingly, the appeal is allowed and the impugned order is set aside. The appellant is entitled to consequential benefits, if any.

(Order Dictated & pronounced in the open court)

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