TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 146
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....they had discharged appropriate excise duty at the time of clearance of the same from the factory. Besides manufacturing, the Appellants also provides taxable output services and discharged service tax. The Appellants also import cars in fully manufactured condition, called as completely built unit (CBU). The said imported vehicles are sold by the Appellant through dealers' network. Since no manufacturing activity or any service has been provided in relation to the imported cars, no excise duty nor service tax is paid on the sale of said cars. 3.1 The appellant have availed CENVAT Credit of Central Excise duty paid on inputs, input services and capital goods. The CENVAT Credit availed on inputs are not used in the import and sale of CBUs. However, credit availed on certain input services are used for manufacture and clearance of dutiable final product, provision for taxable services and also for import and sale of CBUs. The present dispute relates to common input services used in the manufacture of goods, providing taxable output services and sale of CBUs. The common input services are namely, advertisement services, event management services, provisional services, cleaning of pr....
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....ior Advocate Shri V. Sridharan for the Appellant submitted that the Assessee-Appellant are entitled for credit availed on various input services which were utilized alsofor sale for the imported cars (CBUs) specified in Rule 6(5) of CENVAT Credit Rules, 2004. It ishis contention that pro-rata reversal of CENVAT Credit availed on input services attributable to the sale of goods of goods will not apply to these input services enumerated under Rule 6(5) of CENVAT Credit Rules, 2004. Emphasizing the said argument, the learned Advocate has submitted that the exception has been created under Rule 6 of CENVAT Credit Rules, 2004. In the formula under Rule 6(5) of the said Rules, which starts with non-obstante clause should be given effect. It is his contention that it supersedes the sub-rules (1), (2), (3), & (4) of Rule 6 of CENVAT Credit Rules, 2004. Therefore, once a service fall under Rule 6(5) of CENVAT Credit Rules, 2004, then the Assessee is not required to comply with the condition prescribed under Rule 6(1) of CENVAT Credit Rules, 2004. 4.1 He has further contended that the credit of service tax paid on the services used exclusively in the activities of trading has already been ....
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....ing of margin of trading + turnover of dutiable goods and taxable service and the multiplier consist of common input service credit. It is his contention that the formula provided in April 2011 is a well-known method of attribution. Since the said formula being procedural in nature, needs to be applied for the past assessment years also. Referring to the judgment of this Tribunal in the case of Sumitomo Corporation India Pvt. Ltd Vs CST - 2017 (50) STR 299 (T) and TFL Quinn India Pvt. Ltd Vs CCE - 2016 (6) TMI 230 (CESTAT Hyderabad), he has submitted that in absence of any formula for the period prior to 01.04.2011, to determine the turnover for the traded goods, the said formula could be applied for the past period also. 4.4 The learned Advocate has submitted that the suggested formula provided for reversal of credit post 01.04.2011 is defective; the correct formula could be the numerator should consist of value addition of trading and denominator should consist of value addition of trading and manufacturing and the multiplier should consist of common input service credit. It is his contention that this formula is more accurate because the multiplier has contributed to value add....
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....ation of law at the relevant time, hence, extended period of limitation cannot be invoked. In support, they have referred to the judgment of this Tribunal in the case of Krishna Auto Sales Vs CCE - 2015 (50) STR 1121 (T), CCE Vs Thermax Ltd - 2016 (6) TMI 592 (T). Further, they have submitted that the Appellant had maintained regular books of accounts and also the transactions are recorded by them in routine course of business. Therefore, no fact was suppressed from the knowledge of Department. Accordingly, invoking extended period of limitation and also imposition of penalty on the Appellant is unwarranted and unjustified. 5. Per contra, the learned AR for the Revenue has submitted that the Appellants are engaged in the manufacture of motor vehicles as well as trading during the period 2004-05 to 2010-11, a dispute arose about reversal of input service tax credit utilized in respect of exempted services i.e trading. He has contended that from 01.04.2011, in the definition of 'exempted service', an explanation was added where-under, the activity of trading also included in the scope of 'exempted service'. This Tribunal in the Appellant's own case, held that trading was not a serv....
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....e. It is his contention that prior to 01.04.011, the activity of trading was not a service and the new formula prescribed does not lead to distortion as option is available to reverse the credit to the extent of 6%/8% or 10% of the value of exempted service or proportionate reversal of credit as per the formula prescribed under Rule 6(3A) as the case may be. The dispute relates as to what should be the value of service in the form of trading. The question that would be whether the value of 'trading is a service' be equal to the 'margin of profit' in 'trading'? Trading of imported cars involves buying and procuring the imported cars and on selling and delivering the cars to the buyers. Though during the impugned period, trading was not a service and became deemed to be exempted service afterwards, the value of trading should invariably be equal to the value of exempted service. It may reasonably be agreed that proportionate apportionment may be capped at 6% or 8% of the value of the traded cars in line with Rule 6(2) of CENVAT Credit Rules, 2004. He has further submitted that analogy may safely be drawn from such cases where packing and re-packing amounts to manufacture in which dut....
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....ent of imported cars and also on input services exclusively used in providing exempted taxable output services. The credit attributable exclusively in providing exempted services amounting to Rs. 7,21,058/- had been reversed with interest of Rs. 1,60,260/- by the Appellant and not subject matter of the dispute. 8. The Appellant however have availed Credit on common input services used for manufacture and sale of cars, providing taxable output service and also sale of imported cars. The major dispute relates to computation of proportionate credit availed on common input services attributable to sale of imported cars, as the appellant failed to maintain separate account of input services namely, advertisement services, event management services, professional services, renting of premises, telecommunication services etc. used in the manufacture and sale of cars, providing taxable output services and sale of imported cars. Consequently, demand notices were issued for recovery of the amount in accordance with Rule 6(3) of the CENVAT Credit Rules, 2004 from time to time. The first show-cause notice was issued for extended period of limitation and subsequent show-cause notices were issu....
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....usion bearing in mind the same, then, we are required to step in. We cannot sustain this part of the finding and conclusion. Even Mr. Bhate found it difficult to support the same. 22. We are of the view that as far as working of the denominator is concerned (and even the numerator, technically speaking) and to apportion the input credit, it would be appropriate to send the matter back to the Tribunal. This course is also adopted because we do not find any discussion in the Tribunal's order insofar as questions (c) and (d) reproduced above. 23. Insofar as questions (f), (g) and (h) are concerned, the same are consequential and in the event the numerator/denominator as suggested by the assessee is eventually upheld, then, the extended period of limitation would not be applicable. However, that part of the controversy need not be gone into as the essential question is going back for a fresh answer to the Tribunal. 24. In the light of above conclusion and by keeping open contentions of both sides, we allow this appeal by setting aside the impugned order to the extent the same fails to deal with questions (c) and (d). 25. As far as questions (f), (g) and (h) are concerned, t....
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....viding exempted services. In the present case, the appellant had categorically submitted that as and when the aforementioned listed services were used exclusively in providing exempted services or manufacture of the exempted goods, they have reversed the credit availed on such input services. No contrary finding has been recorded by the authorities below to the said claim of the assessee. Therefore, the input services on which CENVAT Credit availed in the present case mentioned under sub-rule (5) of Rule 6 of the CENVAT Credit Rules, 2004 would be admissible, even if the same are used both for exempted services as well as taxable output services giving due effect to the non-obstante clause mentioned under the said Sub-rule. The Revenue's contention, on the other hand, is that if the CENVAT Credit is not used in providing taxable output services, hence credit availed on such services cannot be allowed in view of Rule 3 of the CENVAT Credit Rules, 2004, hence, application of sub-rule (5) of Rule 6 does not arise. In our opinion, there is fundamental fallacy in the approach and would be at the cost ofmis-interpretation of the said rules. No doubt, CENVAT Credit on input services would....
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....es, 2004, which read as under: RULE 6 OF CENVAT CREDIT RULES, 2004 PRIOR TO 01.04.2008: Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT Credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT Credit on inputs shall not be denied to job worker referred to in Rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment 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 a 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 outpu....
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.... their clearance from the factory; or (b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten per cent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to the extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. Explanation I. - The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT Credit or otherwise. Explanation II. - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT Credit wrongly taken. Explanation III. - For the removal of doubts, it is hereby clarified that the credit shall not be allowed on inputs and inputs services used exclusively for the manufacture of exempted goods or exempted services....
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....turer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT Credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT Credit on inputs shall not be denied to job worker referred to in Rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment 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 a 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....
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....ion under this condition; (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month, - (i) the amount equivalent to CENVAT Credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A; (ii) the amount of CENVAT Credit attributable to inputs used for provision of exempted services (provisional) = (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C 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 preceding financial year and D denotes total CENVAT Credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes that total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempt....
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....t paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely :- (i) details of CENVAT Credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT Credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), along with the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condi....
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....contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w),(za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of Section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case of the excisable goods removed without payment of duty are either - (i) cleared to a unit in a special economic zone or to a developer of a special economic zone for their authorized operations; or (ii) cleared to a hundred per cent exported-oriented undertaking; or (iii) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or (iv) supplied to the United Nations or an international organization for their official use or supplied to projects funds by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th A....
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....he manufacture of exempted goods and their clearance upto the place of removal; (ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; (iii) for the provision of exempted services; and (iv) for the provision of output services excluding exempted services, and shall take CENVAT Credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b). (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 any one of the following options, as applicable to him, namely:- (i) pay an amount equal to five per cent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT Credit only on inputs under sub-clauses (ii)and (iv) of the said clause (a) and pay an amount as determined under subrule (3A) in respect o....
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....ds or the provider of output service shall, determine and pay, provisionally, for every month, - (i) the amount equivalent to CENVAT Credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A; (ii) the amount of CENVAT Credit attributable to inputs used for provision of exempted services (provisional) = (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C 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 preceding financial year and D denotes total CENVAT Credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance upto the place of removal or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes that total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted service....
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....nt, where the amount short-paid is not paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely :- (i) details of CENVAT Credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT Credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), along with the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess pay....
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....case of a taxable service, when the option available under sub-rules (7), (7B) or (7C) of the Rule 6 of the Service Tax Rules, 2007 has been availed, shall be the value on which the rate of service tax under Section 66 of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; or (c) in case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent of the cost of goods sold, whichever is more. Explanation II. - The amount mentioned in sub-rules (3), (3A), (3B) and (3C), 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 t....
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....or zinc by smelting; or (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied, - (a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding, in terms of notification No.6/2006-Central Excise, dated the 1st March, 2006. (6A) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the taxable services are provided, without payment of service tax, to a Unit in a Special Economic Zone or to a Developer of a Special Economic Zone for their authorized operations. 15. Sub-rule (3) of the Rule 6 of CCR, 2004 as was existent prior to 1.4.2008 prescribed that the manufacturer or provider of output services , who opt not to maintain separate accounts, which was required in relation to the provider of output services to utilize only the amount....
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....of the quantum of credit attributable to the exempted or non-taxable services, it should be the gross value of traded goods i.e. it should include both the value of the imported cars and the value of the non taxable service. 18. A close analysis of the arguments advanced by both sides it is clear that the nerve chord of the dispute lies in the determination and scope of determination of the 'value'of the traded goods for the purpose of Sub-rule (3A) of Rule 6 of CCR,2004. We find that under the sub-rule (3A) of Rule 6 of CENVAT Credit Rules, 2004 as was in force between 01.04.2008 and 31.03.2011, there is no mention about determination of value of 'traded' goods. In the said explanation, it is prescribed that the value for the traded goods be determined in accordance with Section 67 of the Finance Act, 1994. The said Section 67 reads as follows: - SECTION [67. Valuation of taxable services for charging service tax. - (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount char....
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....lying the said principles to the present case also, that is, in determining the value of non taxable service i.e. 'trading' of imported cars, it cannot include the value of the imported cars while apportioning the quantum of credit availed on common input services and attributable to the sale of imported cars, but the total value of the services/expenses incurred in trading of the imported cars ought to be considered as part of "value" for the purpose of the formula prescribed at sub-rule 3A(c) (iii) for the period 01.4.2008 to 31.3.2011. 20. More or less similar principle has been incorporated in understanding the value of traded goods under amended provisions of sub-rule 3(iv) of the CENVAT Credit Rules, 2004 w.e.f. 01.04.2011. 21. However, we do not find merit in the contention of the learned Advocate for the appellant in assailing the methodology/formula prescribed after 01.4.2011 in support of his argument that only the value addition or the trade margin i.e. the margin earned by sale of imported cars be considered as 'value' in the numerator as well as denominator of the formula prescribed under Sub-rule 3A(c)(iii) for apportioning the CENVAT Credit attributable to exempt....