TaxTMI 
TaxTMI 
2020 (11) TMI 282
X X X X Extracts X X X X
X X X X Extracts X X X X
....arned on input services for discharging its output tax liability in terms of the provisions of the "CENVAT Credit Rules, 2004, the Rules" 3. The appellant is also engaged in trading of goods, which is an exempted service, and the appellant claims that for this reason it did not avail CENVAT credit on the input services used exclusively for trading activity. 4. However, certain input services, on which CENVAT credit was availed, namely, telephone & mobile services, banking & financial services, C&F agent services, annual maintenance services, legal & professional services, were used by the appellant for providing both taxable output services and exempted services. 5. The appellant claims that CENVAT Credit was availed by the appellant after following the procedure of proportionate reversal of CENVAT credit amount attributable to exempted service under rule 6(3A) of the Rules in accordance with the formula prescribed therein under intimation to the Service Tax Range Office. 6. During the audit conducted by the Department, it was noticed that the appellant, while reversing the proportionate credit under rule 6(3A) (b) (ii) & rule 6(3A) (c)(iii) of the Rules, had only consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....correct and is violative of the principles of rule 6(1) of the Rules. Once the identified input services has been exclusively used in taxable service, there is no requirement to reverse any portion of the credit on basis of proportion of trading activity to the total turnover or even for exempted services; (iv) The "total CENVAT credit taken on input services" should include only common input services and services used in exempted services and not the services used exclusively in rendering taxable output service; (v) In order to bring parity with the underlying objective of rule 6, rule 6(3A) of the Rules was amended by Notification dated March 1, 2016 effective from April 1, 2016 by substituting rule 6(3A)(b)(ii) of the Rules, to consider only common input services and not total input service credit, for the purpose of computing the amount of reversal. In this connection reliance has been placed on the decision of the Tribunal in Commissioner of Central Excise & ST, Rajkot v. Reliance Industries Ltd., CESTAT Ahmedabad, 2019 (3) TMI 784; (vi) Reliance placed by the Commissioner (Appeals) on an interim order passed by the Tribunal Thyssenkrupp Industries (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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)******** (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods 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 six percent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3 A); 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 said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ider of output service shall, determine and pay provisionally, for every month, (i) the amount equivalent to CENVAT credit attributable to inputs used in or 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 output 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 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 output and exempted services provide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T credit of common input service and cannot include CENVAT credit on input service exclusively used for the manufacture of dutiable goods. 19. This position is also clear from the underlying object of the amendment made in rule 6(3A) of the Rules by Notification dated March 1, 2016, to consider only common input services and not total input service credit, for the purpose of computing the amount of reversal. 20. Such amendment was also clarified by the Tax Research Unit Circular dated February 29, 2016 to apply retrospectively in as much as the clarification clearly mentions that the provisions of rule 6 providing for reversal of credit in respect of input services used in exempted services, is being redrafted with the objective to simplify and rationalize the same without altering the established principles of reversal of such credit. It has been further clarified at paragraph (iv) of the Circular that the purpose of the rule is to deny credit of such part of the total credit taken, as is attributable to the exempted services and under no circumstances this part can be greater than the whole credit. 21. In this connection, reference can be made to the decision of the Trib....