Rachna Gupta ORDER
V. Padmanabhan, Member (T)
1. The present appeal is filed against Order-in-Original No. RPR/Excus/000/COM/031/2017 dated 21.09.2017 passed by the Principal Commissioner, CGST, CE & Customs, Raipur.
2. The appellant is engaged in the manufacture of sponge iron, billets, rolled items and other goods falling under Chapter 72, 73 etc. The dispute covers the period 2011-12 to 2014-15 (upto August, 2015). The appellant availed cenvat credit on inputs, capital goods and input services. In addition, to manufacture and clearance of excisable goods, the appellant avail loans from various Banks as well as other 'Banking and other Financial Services' from overseas service provider. For such services, they paid service tax under reverse charge mechanism and part of such service tax was allocated to the appellant unit by their corporate office under the registration as input service provider. The departmental officers during the course of audit observed that the appellant did not maintain separate record of input and input services used to provide taxable service under the category of 'Banking and other Financial Services' and hence Revenue was of the view that the appellant was required to reverse 50% of the cenvat credit on input and input service taken, on monthly basis as stipulated under Rule 6(3B) of the Cenvat Credit Rules, 2004. On the above lines show cause notice dated 28.04.2016 was issued which resulted in the impugned order in which cenvat credit amounting to Rs. 3,52,37,222/- was ordered to be reversed alongwith interest and penalty equal to the duty. Aggrieved by the decision, the present appeal has been filed.
3. With the above background, we heard Sh. B.L. Narasimhan, ld. Advocate for the appellant and Sh. M.R. Sharma, ld. AR for the Revenue.
4. The arguments of the appellant are summarised below:
(i) The requirement of reversal of 50% of the credit availed, finding place in Rule 6(3B) is applicable only to Banking Company and a Financial Institution including a 'Non Banking Financial Company'. Since the appellant does not fall within any of the above categories, the requirement of reversal of 50% is not applicable.
(ii) The definition of the term 'Banking Company', 'Financial Institution', and 'Non Banking Financial Company', in terms of the relevant sections of the Reserve Bank of India Act, 1934 makes it clear that the appellant does not fall within any of those categories inasmuch as they are engaged primarily in the business of manufacture of goods and not banking operations.
(iii) He elaborately took us through the definitions in the Reserve Bank of India Act to press the above point.
(iv) It is settled principle of law that taxing statute are to be interpreted literally. The adjudicating authority has recorded in the impugned order that the reversal @ 50% is applicable to the appellant, even though they do not fall in any of the categories, since they have undertaken the activities carried out by the above institutions. Finally, he submitted that the impugned order may be set aside.
5. Learned AR justified the impugned order. He submitted that the restriction of cenvat credit to 50% is to be made applicable to the appellant inasmuch as the activities carried out undoubtedly fall within the category of 'Banking and other Financial Services'.
6. We have heard both sides at length and perused the record.
7. The dispute pertains to the financial lease agreement entered into by the corporate office of the appellant with foreign service providers. The appellant was required to make payment of service tax under the category of 'Banking and other Financial Services' for the services procured from such service providers, on reverse charge basis. The Department is of the view that such cenvat credit availed is required to be restricted to 50% on a monthly basis. Accordingly, demands stand raised.
8. The provisions of Rule 6(3B) ibid are reproduced below for ready refe........