TaxTMI 
TaxTMI 
TaxTMI 
2009 (5) TMI 435
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....age and the accounts maintained by the appellants are not in consonance with Rule 6(2) and, therefore, demand for 10% of the value of exempted of goods payable under Rule 6(3)(b) of the said Rules is warranted. 3. It is the case of the appellants that the Commissioner has failed to take into consideration the factual position regarding the maintenance of the separate accounts which would satisfy the requirement of sub-rule (2) of Rule 6 of the said Rules and that, therefore, there was no case for demand of duty in terms of the provisions of sub-rule (3) of Rule 6 of the said Rules. On the other hand, it is the case of the Department that the assessee is bound to comply with Rule 6(2) in letter and spirit, failing which the action contemplated under sub-rule (3) of Rule 6 has to be followed. 4. While assailing the impugned order, the learned advocate for the appellants submitted that, Rule 6(2), undoubtedly, requires the assessee to maintain separate accounts for the receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods, however, the said sub-rule does n....
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....r & Ors., AIR 1966 SC 12, and drawing our attention to Rule 6 of the said Rules, submitted that when the Rule prescribes a particular method for availing the benefit of exemption or the Cenvat Credit, the assessee has to follow the prescribed method and cannot choose some different method. The tax exemption cannot be availed by adopting non-prescribed method at the sweet will of the assessee, it has to be availed by following the method prescribed under the law. He further submitted that, in case it is not possible for the assessee to comply with the requirement of sub-rule (2), he has to fall back on the provisions of sub-rule (3), but he has no other option left. In the case in hand, according to the learned DR, the investigation clearly revealed that though the appellants had maintained the account regarding the inputs utilized in the manufacture of the product by the appellants the same did not disclose the maintenance of separate account regarding receipt, consumption and inventory of the inputs and the input service meant for use in the manufacture of dutiable final products and the quantity of input meant for use in the manufacture of exempted products and, therefore, no fau....
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....ate accounts for receipt, consumption and inventory of the inputs or input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take Cenvat Credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing out service on which service tax is payable. It cannot be, therefore, disputed that the law on the point of requirement of maintenance of separate accounts regarding the receipt, consumption and inventory of cenvated inputs and non-cenvated inputs is very clear and the Rule 6(2) of the said Rules clearly enables the manufacturer to avail such Cenvat Credit only on the quantity of the input intended for use in the manufacture of dutiable goods, when the manufacturer is engaged in the manufacture of both the products, namely, exempted as well as non-exempted goods. 11. The question, however, which is sought to be raised in the matter is that, sub-rule (2) of Rule 6 does not provide any specific method or manner in which the separate accounts of cenvated inputs and non-cenvated ....
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....iency, the exemption given is made subject to a condition that the person claiming the exemption shall furnish a declaration form in the manner prescribed under the section. The liberal construction suggested will facilitate the commission of fraud and introduce administrative inconveniences, both of which the provision of the said clause seek to avoid." The Apex Court was dealing with the matter in relation to the interpretation of Section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941. 14. Undoubtedly, the Apex Court has observed that no provision in relation to exemption from tax should be interpreted so liberally that it would facilitate commission of fraud and would introduce administrative inconveniences. However, while considering the said law laid down by the Apex Court in Kedarnath Jute Manufacturing Co. Ltd. (supra), one should not ignore the fact that case wherein under Section 5(2)(a)(ii) that there is a specific form prescribed for declaration. The declaration thereunder was required to be furnished in a specific form prescribed thereunder. That is not the case in respect of Rule 6(2) of the said Rules. While sub-rule (2), undoubtedly, requires the assessee ....
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....ly inventory and has taken credit on common inputs to manufacture dutiable and exempted goods. Obviously, the Circular would be attracted in a situation where there is no account maintained and not where the account is maintained or not in a particular form. 17. Reverting to the facts of the case, as rightly pointed out by the learned advocate for the appellants, the show cause notice clearly recorded as under: "(viii) that upto December, 2005 they reversed the credit availed on inputs transferred for exempted category on month end e.g. 4750 kgs. Rosin was received in RG 23A Part I (Cenvatable) vide entry No. 57/5 dated 3-6-2005 and they transferred to RG 23 A Part I (non-cenvatable) on 3-7-2005 (page No. 88) vide entry no. 12/2 dated 3-7-2005 and the Cenvat Credit availed on the transferred Quantity was reversed on 31-7-2005 vide entry No. 460 of RG 23 Part II account. Similarly they also made reversal Entry No. 460/31-7-2005 and 1183/31-12-2005 for the month of July, 2005 to December, 2005; (ix) that after December, 2005 they are debiting the RG 23 Part II on the same day i.e the day on which they transfer the cenvatable input to the non-cenvatable account e.g. important Waste....