TaxTMI 
TaxTMI 
2020 (3) TMI 146
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....thereof. On the said manufactured goods, 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 serv....
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....ised by the Appellant. 4. The learned Senior 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 i....
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....sting of margin of trading, denominator consisting 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 bec....
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....VAT Credit on traded goods since involve interpretation 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 App....
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.... of tax liability, hence, not retrospective in nature. 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 packin....
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....ppellant had not availed CENVAT Credit on the CVD component 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 ....
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....p of the object and purpose sought to be achieved but has not arrived at any conclusion 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 fa....
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....-rule(5) shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing 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 i....
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....gument advanced by both sides, it is necessary to consider the relevant rules developed from time to time under CENVAT Credit Rules, 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 separa....
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....for ultimate sale through public distribution system. the manufacturer shall pay an amount equivalent to the CENVAT Credit attributable to inputs and input services used in, or in relation to, the manufacture of such final products at the time of 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 p....
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....toms Tariff Act when imported into India and supplied against International Competitive Bidding in terms of notification No.6/2002-Central Excise dated the 1st March, 2002 or Notification No.6/2006-Central Excise, dated the 1st March, 2006, as the case may be. RULE 6 OF CENVAT CREDIT RULES, 2004 AFTER 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 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 t....
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.... (i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT Credit of inputs and input services lying in balance as on the date of exercising the option 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 yea....
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.... condition (c) and the aggregate amount determined and paid as per condition (b) , on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid; be liable to pay interest at the rate of twenty-four per cent per annum from the due date, i.e., 30th June till the date of payment, where the amount shortpaid 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, month....
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....ble under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in Rule 14, for recovery of CENVAT Credit wrongly taken. (4) No CENVAT Credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. (5) Notwithstanding anything 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 t....
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....vices 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 - (a) the receipt, consumption and inventory of inputs used - (i) in or in relation to the manufacture of exempted goods; (ii) in or in relation to the manufacture of dutiable final products excluding exempted goods; (iii) for the provision of exempted services; (iv) for the provision of output services excluding exempted services; and (b) the receipt and use of input services - (i) in or in relation to the 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 ....
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....turer 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 manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT Credit of inputs and input services lying in balance as on the date of exercising the option 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) =....
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....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 as per condition (b) , on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid; be liable to pay interest at the rate of twenty-four per cent per annum from the due date, i.e., 30th June till the date of payment, 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 ta....
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.... (3C) Notwithstanding anything contained in sub-rules (1), (2), (3) and (3B), a provider of output service providing taxable services as specified in subclauses (zx) and (zzzzf) of clause (105) of section 65 of the Finance Act, shall pay for every month an amount equal to twenty per cent of the CENVAT Credit availed on inputs and input services in that month. (3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT Credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT Credit of inputs and input services shall be taken. Explanation I. - "Value" for the purpose of sub-rules (3) and (3A), - (a) shall have the same meaning as assigned to it under Section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under Section 3, 4 or 4A of the Excise Act, read with rules made thereunder; (b) in the 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 ....
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....undred 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 August, 1995, number G.S.R. 602 (E), dated the 28th August, 1995; or (iv-a) supplied for the use of foreign diplomatic missions or consular missions or career consular offices or diplomatic agents in terms of the provisions of notification No.6/2006-Central Excise dated the 1st March, 2006, number G.S.R. 96(E), dated the 1st March, 2006; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the C....
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....the first time by inserting clause (c) laying down that in case of trading the value shall be the difference between the sale price and the purchase price of the goods traded. However, it is immediately substituted by Notification No. 13/2011-CE (NT) dated 31.3.2011 before being brought into force from 01.4.2011, prescribing that it shall be the difference between the sale price and the cost of goods (determined as per generally accepted accounting principles without including the expenses incurred towards purchase) sold or 10% of the cost of the goods sold, whichever is more. Learned Advocate for the appellant though challenged the said meaning of value for traded goods, alternatively argued that in apportioning the quantum of credit that has been utilized in providing trading services, is being reasonable over the approach of the adjudicating authority, hence, be adopted retrospectively. 17. The contention of the Revenue is that in absence of the meaning of 'value' of traded goods as laid down w.e.f 01.4.2011, hence for the period prior to 01.4.2011 for the purpose of determination of the quantum of credit attributable to the exempted or non-taxable services, it should be the ....
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....y currency, cheque, promissory note, letter of credit, draft, pay order, travelers cheque, money order, postal, remittance and other similar instruments but doe not include currency that is held for its numismatic value * * * * ] (c) "gross amount charged" includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called "Suspense account" or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.] 19. A plain reading of Section 67 of Finance Act,1994 along with Service Tax (Determination of Value) Rules, 2006, and principles of law settled in this regard, it can easily be construed that the value of taxable services cannot include the value of the material/goods used in rendering the taxable services. Simultaneously, it is an accepted principle that the cost of all ancillary and incidental services for providing the taxable service be part of the value of the taxable service. Applying the said princip....
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....reafter. Also, the Learned Commissioner (Appeals), Pune-III, in the case of Faber Feedcraft Industries 2008(232) ELT 182 observed that the credit on service tax paid on common input services can be availed if the same are used for manufacturing and also in trading activity. Therefore, their contention is that the issue since relates to interpretation of law and judgments on the issue are also in favour of the assessee during the relevant period, credit on common input services was taken under a bonfide belief, hence extended period of limitation is not attracted. We find force in the contention of the learned Advocate for the appellant. At the first instance there is no suppression as the fact of trading was communicated much earlier to the department i.e. in 2001 and necessary permission was granted to them. Also, the issue whether trading is an exempted service or otherwise was in dispute in the context of Rule 6 of CCR,2004 during the relevant period and judgments are delivered in support of the trade also. In these circumstances since the issue involves a pure question of interpretation of law, and relevant facts neither suppressed nor misdeclared, invocation of extended period....