ORDER
M.V. Ravindran, Member (J)
1. This appeal is filed by the revenue against the order-in-appeal No. Goa/Cex/MP/101/ST/2007 dated 12/09/2007.
2. Heard both sides and perused the records.
3. The revenue is aggrieved by the order of the Commissioner (Appeals) on the ground that the Commissioner (Appeals) has not considered the provisions of Cenvat Credit Rules 6(3) and 6(5). It is the submission of the Ld. SDR that the respondent in this case has not maintained separate records for utilization of the credit taken and the services received by them for exempted and for the non-exempted categories. He submits that the provisions of Rule 6(3)(c) will be applicable and the respondent is entitled to utilize only 20% of the amount of credit that is available to him as a credit. The authorised representative of the respondent on the other hand submits that the provisions as appreciated by the Commissioner (Appeals), is correct and submits that the order interprets the law as is in the Rule books. It is his submission that the credit of Service Tax paid on the services availed as mentioned in sub Rule 6(5) are not disputed by the revenue.
4. The revenue seeks to deny the credit to the respondent on the ground that the provisions of Rule 6(3)(c) will be applicable in this case as the respondent has not maintained separate books of accounts to indicate the utilization of the service tax credit for the exempted as well as for the non exempted category of the services provided to him.
5. It is seen that the Commissioner (Appeals) while arriving at the conclusion that the appeal of the respondents has to be allowed has observed as under:
The credit which has been taken by the party is on some of the 17 services, which are covered under Rule 6(5) of the Cenvat Credit Rules, 2004. Two arguments have been evidenced by the department in denying this credit; the first being that since the assessee is supplying dutiable as well as exempted services under Rule 6(3), separate records need to be kept for dividing the credit taken and the second argument is that even if the credit has been allowed under Rule 6(5), then too the assessee could only take the credit and was not allowed to utilize the same.
Examining the first argument and studying the relevant sections, it is seen that in the present case Rule 6(3) is not the relevant rule to be applied since it has been admitted by the department also that the services on which the credit had been taken are amongst 17 services mentioned under Rule 6(5). Once I come to Rule 6(5) the important portion here is the word “not withstanding”. The very use of this word means that Rule 6(3) is not applicable for the input services mentioned under Rule 6(5).
In fact in para 9, the adjudicating authority himself has said that it is clear that a service provider, who provides taxable and exempted services shall be allowed, credit of the whole of service tax paid on taxable services specified in the said Sub-rule 6(5) unless the said service is exclusively used in or in relation to manufacture of exempted goods or providing exempted services although no separate accounts for receipt/consumption of the input services are maintained”. Now after writing this sentence how he confirms the demand is not clear all because in this sentence he is saying that credit of whole of service tax shall be allowed unless the said service is used exclusively in relation to exempted goods. Since this is not the case, credit is obviously allowed.
Now once this credit is fully allowed as per Rule 6(5) the argument given by the adjudicating authority in para 10 falls flat.
Just for the sake of clarity, 1 would like to clarify one thing further. There may be an argument by the department that the credit can be taken but not utilized. To examine this at this juncture itself, I reproduce below the relevant rule:
Notwithstanding anything contained in Sub-rule (1), (2) and (3) credit of the whole of service tax paid on taxable service as specified in Sub-clause (g) (q) (r) (v) (w) (za) (zm) (zp) (zy) (zzd) (zzg) (zzh) (zzi) (zzk), (zzq) and (zzr) of Clause (105) of Section 65 of the Finance Act shall he allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services.
This rule does not talk about taking or utilization, so the credit is allowed to both taken and utilized.
6. It can be seen from the above reproduced portion of the order that the Commissioner (Appeals) has correctly come to the conclusion that credit of the service tax paid on the services as enumerated under Rule 6(5) of the Cenvat Credit Rules 2004 are to be allowed. It can be noticed that Rule 6(5) starts with a non-obstante clause “notwithstanding”, which would indicate that the provisions of Rule 6(3) are not applicable for the provisions of Rule 6(5) of Cenvat Credit Rules, 2004. If it is undisputed that the service tax credit availed is on the services as mentioned in Rule 6(5), the credit of the entire/whole amount of service tax has to be allowed to the respondent.
7. It was sought by the Ld. SDR to distinguish the word “as to taking and allowed” of the credit. I am unable to understand the stand of the revenue. If an assessee to takes eligible credit, he should be allowed to utilize the same, also there could no reason for allowing the credit and not permitting the utilization. This would go against the substantive legislation of the Cenvat Credit Rules 2004.
Accordingly, I find that the impugned order of the Commissioner (Appeals) is correct and does not suffer from any infirmity. Consequently, the appeal filed by the revenue is rejected.
(Dictated in Court)