TaxTMI 
TaxTMI 
2017 (9) TMI 631
X X X X Extracts X X X X
X X X X Extracts X X X X
....e present appeal proceedings is 1.4.2005 to 31.3.2008. 3. The appellants availed cenvat credit in the following manner: (a) cenvat credit attributable exclusively to taxable services availed fully (b) cenvat credit attributable exclusively to exempted services were not availed (c) cenvat credit on input services which are common to both taxable service and exempted services were availed in full and these credits did not exceed 20% of output service tax liability and hence these were utilized without restriction. (d) service tax credit on services listed in Rule 6 (5) and cenvat credit on capital goods were fully availed and utilized. 4. The appellants were earlier availing credit on input services which were used by them for taxable as well as exempted services and were utilizing such credits only to the extent of 20% of the output tax liability in terms of Rule 6 (3) (c) of CCR 2004 during the material time. However, from August 2005, they switched over to the present system of availing full credit on such common input services, for which no separate accounts were maintained, and utilized the full amount of such credits. The appellant claimed that since the full ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as examined by the original authority along with his reasoning, it is necessary to reproduce the relevant portion of the impugned order which is as under : "22. Next, I find that the taxpayer have argued that they are eligible for full credit of those services mentioned under Rule 6(5), which do not require maintenance of separate books of accounts, notwithstanding anything contained in sub-clauses (2), (3) of (4) of Rule 6 of CCR, 2004. They have given details of such credit taken by them under Rule 6(5) and statement showing accounting of such inputs services in their computerised accounting system. I thus find that the credit taken by the taxpayer under Rule 6(5) is also in order. Having discussed on the eligibility of credit used for exclusive taxable services, credit on capital goods not used exclusively for providing exempted service and credit on services specified under Rule 6(5), what remains to be answered is their eligibility to take credit of common input services and its utilisation restricted to 20% of taxable output service under Rule 6(3) of CCR 2004. 23. In this regard, I note that as per Rule 6(3) of CCR, 2004, which begins with a non-obstante clause, regar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e services under Rul3 6(2) and also for common services within the 20% limit, the entire credit availed on common input services in the present case, are well within the 20% limit, which would tantamount to allowing full credit of common input services, which is not the intention of the legislature. 25. Further, even if the taxpayer had maintained separate accounts for certain taxable services and common accounts for certain taxable and exempt services, then such benefit could be given, as the 20% limit can be reckoned only to the value of taxable and exempt service for which common accounts are maintained. However, in the present case, the common input service credit taken by the SBUs, Finance, administration, accounts and corporate, do not provide any taxable / non-taxable service, but in turn provide services to the all other SBUs that provide taxable / exempt services and the 20% reckoning has to be made to the total taxable output services, which would amount to allowing the entire credit under Rule 6(3), which is not the intention of legislature as mentioned in para supra. I find that the taxpayer had NIL closing balance of the input service tax credit on common services u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ratio to the total are not known and the taxpayer has not taken proportionate credit relating to taxable services, but taken the entire credit on common input services and utilised the same within the limit of 20% of total taxable output services. The circumstances in the present case are different from that of the case of M/s. Royal Sundaram quoted by the taxpayer and hence the said the decision cannot be squarely applicable here." 7. Ld. counsel contesting the findings of the original authority submitted mainly on the following grounds : (a) The impugned order which was passed as per the remand direction dt. 29.09.2008 of the Tribunal has travelled beyond the scope of such remand. The original authority held that the appellants wrongly followed the provisions under Rule 6(3) when they have maintained separate accounts in respect of common input services in terms of Rule 6 (2). There is no bar in availing credits as per mechanisms as provided under Rule 6 (2) as well as Rule 6 (3). (b) It is only in respect of inputs / input services where an assessee is unable to maintain separate books of accounts, they have taken recourse to the mechanism under Rule 6 (3). Thereafter t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the principles and the mechanism of CCR as provided under Rule 6 as well as Rule 3 of the CCR 2004. By selective application of rule, the appellants have in fact availed and utilized credits on input services used for exempted output services. Such practice is against the basis of CCR 2004. 9. We have heard both the sides and perused appeal records. The facts of the case are not in dispute. It is only the application of provisions of Rule 6 to the facts of the case which are in dispute. Admittedly, the appellants were using inputs / input services which are common for exempted as well as taxable output services. In respect of certain services, they have maintained separate accounts in terms of Rule 6(2) which was found to be correct and proper by the original authority. However, the dispute is in respect of certain other common input services they have followed the scheme under Rule 6 (3). In this regard, it is necessary to reproduce the relevant portion of the provisions of Rule 6 of the CCR which are as under : "Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. 6. (1) The CENVAT credit shall not be allowed on such q....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and 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 output service on which service tax is payable. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely:- (a)... .... .... .... (b).... .... .... .... (c) the provider of output service shall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure of dutiable final products or in providing output service as well as exempted goods. A combined reading of provisions of Rule 6 makes it clear that cenvat credit shall not be allowed for input services used for exempted service except where the manufacturer using common input services, both for exempted as well as taxable output services maintains separate accounts in respect of consumption of such input services on which credit is availed. 12. Sub-rule (3) of Rule 6 is another option to the manufacturer who opts not to maintain separate accounts under sub-rule (2). Thus sub-rule (3) provides for a situation when a manufacturer / service provider who is using common inputs for dutiable and exempted products is not able to maintain separate accounts. Though the sub-rule uses the words 'opting not to maintain separate accounts', in fact, the same has to be construed to mean that when not able to maintain separate accounts for e.g:- due to the complex process of manufacture or complex stream of use of such inputs / input services, there is no compulsion on the manufacturer / service provider to maintain separate accounts, and the manufacturer / output service prov....