https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769625 https://www.taxtmi.com/caselaws?id=769625 Non-compliance of the obligations imposed on the manufacturer of final products or provider of output service, in availment of CENVAT Credit, in specified situations mentioned therein, under Rule 6 of the CENVAT Credit Rules, 2004 - HELD THAT:- On plain reading of the legal provisions under Rule 6 of CCR of 2004, it transpires that while providing a comprehensive input credit scheme of the duties and taxes paid on input and input service, the Government had provided for an exception of not extending such input credit facility in respect of those inputs and input services used in or in relation to exempted goods or exempted services. The rationale of this provision is evident inasmuch as the CENVAT credit scheme enables the manufacturer or output service provider to use the credit to reduce the cascading effect of tax on input/input service embedded in the duty or tax liability on the final product or output services - the appellant has followed Rule 6(2) ibid inasmuch as the various manufacturing units situated at Aurangabad, Mulund, Baddi are registered individually with jurisdictional Central Excise authorities and maintained separate records for availing CENVAT credit, and have not taken credit on the inputs and input services used in provision of exempted service viz., trading which has been undertaken only by HO and the manufacturing units have taken credit only on the inputs and input services used in manufacture of dutiable goods and not in respect of exempted goods. From the legal provisions of the Finance Act, 1994, it is understood that 'trading' is a form of service and no service tax is leviable on it and hence it is an exempted service. Usually the amount one pays to a service provider is the value of the services. For example, what one pays for a service, the amount paid represent not only the service rendered by trader, but also the value of the goods purchased and delivered. The service element cannot be the total turnover of the goods traded but is only a small fraction of the turnover - On reading of the Explanation I(c) to this Rule 6 ibid, for both the relevant periods (April 2016 to June 2017 and earlier periods) it clearly specifies that in case of trading service, the value of the service is the difference between the buying and selling price or 10% of the traded goods whichever is higher. In the present case, the only dispute is regarding the credit on common input services used in their HO unit, which was transferred to the field units through ISD invoices. This credit cannot be attributed wholly to either the dutiable goods manufactured or the exempted service rendered viz., trading. This should therefore, be apportioned in terms of Rule 7 ibid. The adjudicating authority, therefore, erred in taking the total credit taken (including credit taken on inputs and input services used exclusively for manufacture of dutiable goods) to calculate the amount of CENVAT credit that must be reversed under Rule 6(3A) ibid. For the period April 2016 to March 2017, this was clearly, against the explicit rule position as laid down in Rule 6(3A)(b). Therefore, the calculation of CENVAT credit adopted by the learned adjudicating authority does not stand the scrutiny of law. Conclusion - The appellants having exercised the option under Rule 6(3A)(a) and submitted requisite intimation, and having maintained separate records for inputs and input services used exclusively for dutiable goods and exempted services, are entitled to apply the formula under Rule 6(3A) for proportionate reversal of credit on common input services. The impugned order is set aside - appeal allowed. Case-Laws Service Tax Fri, 25 Apr 2025 00:00:00 +0530