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June 2014

2014 (34) STR 90 (Tri.-Mumbai) CCE, Goa vs. Asia Pacific Hotels Ltd.

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Whether CENVAT credit allowable signifies its availability or its utilisability?

Facts:
Respondent was engaged in the hotel business and provided services such as beauty parlour, health club & fitness centre, dry cleaning, internet cafe, mandap keeper services etc. Respondent also provided non-taxable services such as hotel accommodation, restaurant & bar services. Respondent availed CENVAT credit of service tax paid on certain services which were utilised for taxable and non-taxable services as per provisions of Rule 6(5) of CCR. Revenue contended that the said Rule permitted taking of the credit and not permitted its utilisation and accordingly the demand was raised to the extent of credit was utilised by the Respondent. In the appeal proceedings, Revenue had a single ground that Rule 6(5) of CCR allows assessee to take the credit and therefore ‘taking’ of credit is distinct from ‘utilisation’.

Held:
Tribunal held that the purpose and objective of CCR is to allow a manufacturer/service provider not only to take credit but also to utilise the same. Therefore, if Respondent is allowed only to ‘take’ the credit without allowing it to ‘use’, the basic objective of CCR would be defeated. The Revenue’s appeal was rejected.

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