By Puloma Dalal, Jayesh Gogri, Mandar Telang; Chartered Accountants
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Cross utilization of credit of excise duty and service tax is allowed.
Facts
Assessee is engaged in manufacture and is also providing services for which they have taken separate registration with the respective authorities. During scrutiny, it was observed that credit of service tax paid on services which were required in connection with erection and commissioning service were utilized for payment of excise duty on manufacture which the departmental authorities disputed. The adjudicating authority confirmed the demand. Therefore an appeal was filed before the Tribunal wherein it was held that CENVAT Credit Rules, 2004 provides restrictions on utilisation of CENVAT credit but such restrictions do not cover cross utilization of credit of excise and service tax, as a general proposition and the intention appears to be to permit cross utilization of excise duty and service tax.
Held
The Court observed that Rule 3(1) of the CENVAT Credit Rules, 2004 provides that a manufacturer or a service provider shall be allowed to take credit on various duties which includes excise duty, service tax etc. and that is a substantive provision in the rules. Therefore Tribunal has rightly come to the conclusion that cross-utilization is permitted. It was further noted that department has issued a circular dated 30/03/2010 on the issue of cross utilization guiding the departmental officers on the accounting aspects and on verification of the credits in both the excise and service tax returns. The Appeal is accordingly dismissed.
