TaxTMI 
TaxTMI 
2013 (8) TMI 463
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....exemption, the appellants cleared these products without payment of duty. Since the appellant was manufacturing both dutiable as well as exempted products, they maintained separate accounts for the receipt, consumption and inventory of inputs in respect of both dutiable exempted products and took credit only in respect of those inputs which were utilized in the manufacture of dutiable products. The appellant was also availing credit of service tax paid on common input services such as Courier service, Telephone service, professional charges, security service, construction service, housekeeping service, catering service, freight inward etc. The appellant did not maintain separate accounts in respect of such input services used in the manufacture of dutiable as well as exempted goods, as it was difficult for them to maintain into separate accounts. They were unaware of the provisions of Rule 6(2) of CENVAT Credit Rules 2004 which mandated maintenance of separate accounts both in respect of inputs as well as input services used in the manufacture of dutiable goods as well as exempted goods. The appellant also submitted a letter dt. 10.11.2008 to the department wherein they informed th....
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....entral Excise Rules, 2002. 3. The learned Counsel for the appellants makes the following submissions: (1) "As per the provisions of Rule 6(2) of the Cenvat Credit Rules, when common input service are used in the manufacture of final products which are chargeable to duty as well as exempted, separate accounts are to be maintained and credit shall be taken only on that quantity of input service intended for use in the manufacture of dutiable goods. If separate accounts are not maintained, then under Rule 6(3) two options have been provided. Under Sub-Rule 3(i), manufacturer shall pay an amount equal to 5%/10% value of the exempted goods or under Sub-Rule 3(ii), the manufacturer shall pay an amount equal to the Cenvat Credit attributable to the input services used in or in relation to the manufacture of exempted goods, subject to following the procedure prescribed under sub-rule 3(A). The manufacturer is entitled for availing any of the above two provisions. In the present case they have reversed the entire input service tax credit taken during the period along with interest thereon prior the issue of show cause notice, not only in respect of exempted products but a....
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....it along with interest which shows their bona fides. Therefore, the imposition of penalty on the appellant and its manager is totally un-called for. 4. The learned Additional Commissioner (A.R.) appearing for the Revenue, on the other hand strongly opposes the contentions raised by the learned Counsel for the appellant. He submits that when separate account are not maintained for input services used in the manufacture of both dutiable as well as exempted products, then under the provisions of Sub-Rule (3) of Rule 6 two options are available to the assessee. Under Sub rule 3(i) the assessee can pay an amount equal to 5%/10% of the value of the exempted goods or under Sub-rule 3(ii) the assessee has to reverse the amount equivalent to the Cenvat credit attributable to inputs/input services used in or in relation to the manufacture of exempted goods subjected to the conditions and specified in Sub-rule 3(A).Sub-rule 3(A) envisages giving an option to avail of the facility as detailed in clause (a) thereto and reversing credit on a proportionate basis every month provisionally, final determination of the proportionate credit annually and payment of interest on the credit, if any tak....
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....ed goods and the provider of output service shall pay an amount equal to six percent, of value of the exempted services; or (ii) the manufacturer of goods or the provider of outputs service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I. - If the manufacturer of goods the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by hi, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II. - For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the man....