TaxTMI 
TaxTMI 
2019 (11) TMI 952
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....e CENVAT Credit availed on such inputs under Rule 3(5) of CCR 2004. (b) Whether the appellant is liable to pay an amount under Rule 6(3)(1) when they have reversed proportionate amount of CENVAT Credit on the inputs used in manufacture of exempted products. (c) Whether the interest is leviable on the aforesaid two demands, and (d) Whether any penalties imposable upon the appellant. 2. It is the case of the Revenue that sale of goods amounts to trading which is undisputedly an exempted service. When the goods which were purchased and CENVAT Credit was taken on them and were later re-sold by the appellant, it is nothing but a trading activity which is an exempted service. Rule 6(3) of CCR 2004 requires the appellant to pay an amount calculated as per rule when they used the inputs for the exempted service viz; trading. Ld. DR relies on the definition of "trading" in the following two Dictionaries:- (a) "P. RAMANATHAN IYER's - MAJOR LAW LEXICOM The business of buying and selling or bartering commodities (Indian Contract Act (9 of 1872). (b) BLACK's LAW DICTIONARY The business of buying and selling esp. of commodities an....
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....ctured by the appellant. Ld. Counsel for the appellant submits that they purchase various chemicals in bulk to meet the production requirements, from time to time. These chemicals have multiple potential uses and because of the very nature of industry, they cannot be assigned to particular final products. For instance, a solvent like Acetone can be used in manufacture of several pharmaceutical products. They use them as required. Some quantity of the same chemical may be used for manufacture of dutiable product and subsequently some quantity of the same chemical may be used for manufacture of another exempted final product. Therefore, they have reversed proportionate amount of CENVAT credit. For manufacture of 1 Kg of each final product, there are standard norms as to how and what quantity of different chemicals are required. They have calculated the amount of CENVAT Credit availed based on these norms and reversed the amount. He draws the attention of the Bench to the Work sheet at Page 153 of the paper book to explain how the amount was reversed. He would rely on the case laws of Astrix Laboratories Limited vs. CCE, C&ST, Hyderabad-I [2019(5)TMI 1344-CESTAT-HYDERABAD] and Matrix ....
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.... 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 or 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 him, 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 manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- (i) name, address and registration No. of the manuf....
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....services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and P denotes total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid ....
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....nt determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. Explanation I.- "Value" for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made there under. Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III.- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shal....
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....at the stage of receipt of the inputs because of the nature of the pharmaceutical industry. Rule 6(2) does not require separate stocks of inputs to be maintained. In the case of Astrix Laboratories Limited (supra) and Matrix Laboratories Ltd. (supra), the appellant had not taken CENVAT Credit at the receipt of the inputs but had taken proportionate amount of CENVAT Credit when these inputs were issued for manufacture of dutiable goods. They, on the other hand, have taken the CENVAT Credit at the time of receipt but have reversed the amount of CENVAT Credit attributable to the inputs which have gone into the manufacture of final products. In both the cases, the formula which has been adopted was based on the standard norms for manufacture of each pharmaceutical drug. Therefore, their activity is covered under Rule 6(2) of CCR 2004. 10. I have considered the arguments on both sides and perused the records. The first question is whether the appellant is required to pay amount under Rule 6(3) in respect of exempted service viz: 'trading' undertaken by them or they could reverse an amount under Rule 3(5) when the inputs are removed as such. I find from the rules that both options are....