2019 (2) TMI 1382

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....o the Department that the appellants while calculating the proportionate credit attributable to exempted services had not adopted the correct value of the taxable service "hypothecation and loan activity" in the numerator and denominator in the formula prescribed under Rule 6(3A) of the CENVAT Credit Rules (CCR), 2004. 2. Accordingly, Show Cause Notice dated 27.09.2011 was issued inter alia proposing recovery of an amount of Rs. 2,07,49,189/- with interest thereon and also imposition of penalty under various provisions of law. In the adjudication proceedings vide the impugned Order dated 28.08.2012, the adjudicating authority had noted that as per Notification No. 04/2006 dated 01.03.2006, 90% of the value of taxable service of the appella....

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....erabhadra Reddy takes us through the definition of "exempted services" under Rule 2(e) of the CCR, 2004 to contend that in the particular case, the service tax was exempted on 90% of the gross value and hence, the taxable service carried out by the appellants were exempted from the whole of service tax leviable thereon up to 90% of the gross value. He draws our attention to paragraph 8 of the Show Cause Notice which points out that the appellant had paid service tax only on 10% of the gross value; that however for the purpose of working out proportionate credit on exempted services, they adopted the entire gross income from the said services including the exempted value, the value of taxable services under factor "F" in the prescribed formu....

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....sider the 90% which enjoys exemption from payment of service tax as exempted services and include this value for arriving at the amount that has to be reversed. 7. According to the appellants, the said 90% cannot be included in the category of exempted services because 10% of the interest amount suffers from service tax. Therefore, the services are not wholly exempted from service tax and cannot be considered as exempted services. We find substance in the said argument. 8.1 The definition of "exempted services" during the relevant period is reproduced below : " 'exempted services' means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under Sec....

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....or total value of taxable exempted services provided plus total value of dutiable and exempted goods manufactured and removed during the preceding financial year; and G denotes total CENVAT credit taken on input services during the month. 10. As far as the denominator (F) is concerned, there is no dispute between the parties but the only dispute is in the numerator (E). The Revenue wants to adopt the entire value of interest on loans in addition to the value of exempted services. The ratio of this Bench in the earlier order (supra) makes it clear that the Revenue is not justified in considering the portion of value of taxable service exempted in the formula for determining the amount to be reversed. The Notification supra exempts 90 per ce....