CENVAT exclusively related to dutiable goods not required to be included in total CENVAT credit while apportionment
Published In : EvoBreyta Download
Author : Navneet Singal
CENVAT exclusively related to dutiable goods not required to be included in total CENVAT credit while apportionment between dutiable goods and exempted goods – CESTAT Allahabad Bench
Case Name: M/s Honda Motor India Pvt. Ltd. Versus Commissioner, GST & Central Excise, Gautam Budh Nagar
Case No.: Excise Appeal No.70347 of 2018 Dated: 09.10.2024
(Order by the Allahabad Bench of CENVAT is enclosed)
In a major relief to Honda Motors, the Allahabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the CENVAT Credit, which pertains to input services exclusively used in dutiable goods, is not required to be included in the “total CENVAT Credit” for apportionment between exempted services and dutiable goods.
Fact of the Case
The Appellant is also engaged in trading of goods, which is an exempted service and thus, no Cenvat credit was availed by the Appellant on the input services, which were exclusively used for trading activity. However, certain input services, on which Cenvat credit was availed, namely, Warehouse Support Services, Goods Transport Agency (inward freight), Renting of Warehouse, Legal & Consultancy Services etc., were used by the Appellant in both manufacture of dutiable goods and provision of exempted services i.e. trading.
The common Cenvat credit was availed by the Appellant, following the procedure of proportionate reversal of Cenvat Credit amount attributable to exempted service under Rule 6(3A) of the CENVAT Credit Rules, 2004 as per the formula prescribed therein, under due intimation letter filed at the beginning of each Financial Year, to the Excise Range Office.
Issue Raised
The issue raised was whether the CENVAT Credit, availed on the input services used exclusively in the manufacture of the dutiable goods, was required to be included in the numerator for apportioning the common credit between the exempted service (trading) and dutiable goods.
Conclusion In Favour of Honda Motors
The tribunal held that the CENVAT Credit, which pertains to input services exclusively used in dutiable goods, is not required to be included in the “total CENVAT Credit” for apportionment between exempted services and dutiable goods. It has been held that for apportionment of CENVAT Credit, only such credit which was availed on input service used commonly in exempted service and dutiable goods has to be taken into consideration.
The tribunal while allowing the appeal held that to invoke proviso to Section 73(1), the conditions stated therein is required to be fulfilled, it should be proved that the Appellant had, by some positive act, suppressed the fact from the department with an intention to evade irregular Cenvat credit. There is no suppression of facts.
The tribunal held that since the demand of Cenvat Credit itself is not sustainable, penalty is not imposable and consequently, no interest is also recoverable.
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