TaxTMI 
TaxTMI 
2022 (2) TMI 729
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.... products include LPG (Domestic), SKO (Domestic), etc. In respect of some of these products the goods become dutiable or exempt depending on whether they were cleared through the Public Distribution System (PDS) or otherwise. Therefore, at the time of manufacture it is not known whether the goods will be exempt or dutiable. The respondent avails Cenvat credit and had taken Cenvat credit on common inputs and input services which go into manufacture of dutiable as well as exempted products. However, they have availed Cenvat credit on these common inputs/input services only to the extent of 85%. The proportionate value of the exempted goods manufactured by the respondent as per the books of accounts was about 10% and never touched 15%. 2. The case of the Revenue is that the respondent had not maintained separate records in respect of records of receipt, consumption and disposal of common inputs/input services for dutiable/exempted product as required under Rule 6(2) of the Cenvat Credit Rules, 2004 [CCR 2004] and, therefore, it is required to pay an amount equal to 10% of the value of the exempted products as per Rule 6 (3) of CCR. Show cause notices were accordingly issued but the d....
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.... Rules is concerned ; 4. Relying upon the judgment of the Hon'ble Supreme Court in the case of Chanderpur Magnet Wires (P) Ltd. [1996 (81) E.L.T. 3 (S.C.)], he held that reversal of credit is to be construed as non-availment of the credit. He also relied upon the judgment of Hon'ble High Court of Gujarat in the case of CCE versus Ashima Dyecot Ltd. [2008 (12) S.T.R. 701 (Guj.)] 5. The grounds of appeal of the Revenue in this case are that the matter was remanded by the Tribunal to the Commissioner to decide the issue of reversal keeping in view the amendments to Rule 6 of CCR to which retrospective effect has been given by the Finance Act, 2010. The relaxation in this provision of the Finance Act, 2010 was subject to some conditions, which were not fulfilled by the respondent and, therefore, they were not entitled to the benefit of Finance Act, 2010. It has also been asserted that since the Tribunal has remanded the matter only to consider the provisions of Finance Act, 2010, the learned Commissioner could not have gone into any other provisions of law and the matter should have been decided accordingly. Since the respondent has not fulfilled the conditions of Finance Act, 2010, ....
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....as port services for crude oil handling but in the adjudication order only reversal of credit on inputs by the noticee has been mentioned, but there is no indication of reversal of proportionate credit on the input services. Since the respondent did not maintain separate accounts they are liable to pay an amount equal to 10% of value of the exempted goods and since they have not been done so, the learned Commissioner should have confirmed the demand. 12. We have considered the arguments made on both sides and perused the records. The questions which need to be answered in these appeals are: a) Are the SCNs demanding an amount of 10% of the value of exempted goods under Rule 6(3) of the CCR, which culminated in the impugned orders legally sustainable? b) Was the Commissioner correct in examining the three cases where the orders were in the remand proceedings in terms of Rule 6(2) of the CCR or has the Commissioner gone beyond the scope of the remand? c) Has the respondent fulfilled its obligations under Rule 6(2) of the CCR by taking only 85% of the credit on the common input services? d) Is the demand under Rule 14 invoking extended period of limitation in the SCN sustaina....
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....lue addition by the assessee. It is impractical to assess the value addition in respect of each transaction. Therefore, the Central Excise Act and Rules provided for a practical mechanism of allowing the manufacturer to take credit of the duty paid on the inputs and input services by its suppliers of goods or services and use it to pay excise duty on the final products manufactured by it. Unless there are some distortions due to vastly different rates of duty or tax on the inputs or input services and rates of duty on the final product, the manufacturer ends up paying duty in cash only to the extent of value addition by it and the rest of duty paid by it gets paid from the Cenvat credit. However, there is no one-to-one correlation between the credit taken on inputs/input services and the final products into which such inputs or input services have gone into. For instance, if one receives inputs on the first day of a month, one can take credit and use it to pay duty on the goods cleared on the same day although the duty paid inputs may be used for manufacture much later. This entitlement to take and use CENVAT credit is subject to the CENVAT Credit Rules. 16. The Cenvat Credit Rule....
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....ervice opting not to maintain separate accounts shall follow any of the following conditions applicable to him. It has three clauses: (a), (b) & (c) of which the one in dispute is (b) which reads as follows :- "(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 ; 19. This Rule 6(3) was amended w.e.f. 01.03.2008 and a new Rule 6 (3A) was also introduced. After amendment, there were Rule 6 (3) & Rule 6 (3A) which read as follows :- (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 either of the following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to ten per cent of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent of value of the exempted servi....
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....otal 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 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 services provided, and 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; (c) The manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :- (i) The amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, deno....
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....ise, for the whole financial year, determined provisionally as per condition (b) ; (2) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (3) Amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (4) Interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (5) Credit taken on account of excess payment, if any, determined as per condition (f) ; (h) Where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (....
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....he amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of exempted goods, within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. (3) The Commissioner of Central Excise shall, on receipt of an application under sub-section (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the application and in case the amount so paid is found to be less than the amount payable, he shall call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard. (4) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on an....
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....rises is if the manufacturer takes CENVAT credit and does not follow any of the obligations under Rule 6 can it be compelled to follow any of the options? A plain reading of the Rule does not show so. An illustration will make the position clear. Colleges select students and grant them admission to various courses. The selection will be subject to conditions such as, produce all the original certificates for verification, pay the fee by a certain date, etc. If the fee is not paid by that date, the college may give the student the option to pay the fee by a further date with late fee. In such a case, the student has an option of not producing his certificates and not paying the fee and not taking the admission at all. He also has the option of producing his certificates and paying the fee in time and taking the admission. He has a third option of producing his certificates and paying the fee late along with the late fee. If he doesn't follow any of the available options, he loses his admission. However, the college cannot compel him to follow any of the options. The college cannot extract the fee from him or compel him to produce his certificates. Taking admission or fulfilling the ....
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....ect of input or capital goods or input services has been taken or utilised wrongly by reason of fraud, collusion or any willful mis- statement or suppression of facts, or contravention of any of the provisions of these rules or of the Finance Act or of the rules made thereunder with intent to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of Section 78 of the Finance Act. (4) Any order under sub-rule (1), sub-rule (2) or sub-rule (3) shall be issued by the Central Excise Officer following the principles of natural justice. 25. Therefore, there is no Rule under which a manufacturer can be compelled to follow any of the options of Rule 6.The SCNs in these appeals were issued proposing to recover under Rule 14 of CCR an amount to fulfill obligations under Rule 6(3). A plain reading of Rule 14 shows that it does not empower the Revenue to compel the manufacturer to maintain separate accounts or to pay an amount equal to 10% of the value of the exempted goods. Therefore, any demand of an amount under Rule 6(3) is per se, without any authority of law and there is no Rule under which such an amount can b....
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....e same by producing debit notes instead of invoices cannot be accepted". All the SCNs which culminated in the impugned orders are not sustainable in these appeals on this ground itself.The answer to the question (a) in paragraph 12 above is NO. However, we also proceed to examine the remaining questions which we set out in paragraph 12. 26. The first ground of appeal of Revenue in respect of the remand matters by the Revenue is that this Tribunal has remanded the matter to consider the matter in the light of amendment made in Finance Act, 2010 and, therefore, the Commissioner should not have gone beyond the scope of the remand order and should not have decided the matter on another ground i.e., Rule 6(2) requirements have been fulfilled. A perusal of the remand orders reproduced above shows that the Tribunal has not made any decision with respect to the case and remanded the matters as it was brought to the attention of the Tribunal that retrospective amendment has been made by Finance Act, 2010. We do not find that Tribunal has either restricted the discretion of the Adjudicating Authority to deciding the matter only in the light of the amendment nor has it made any determinatio....
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....d that the respondent has produced certificate from the Chartered Accountant who has audited their accounts showing that the percentage of exempted goods cleared by them never touched; late alone exceeded 15% and they have taken credit on common inputs and input services only to the extent of 85%.We find that as per the evidence produced by the respondent they have more than fully met the requirements of Rule 6(2). On the other hand, we do not find any evidence produced by the Revenue to show that the proportionate amount of Cenvat credit reversed/not taken by the respondent was calculated wrongly. Revenue also has not produced any alternative calculations to show how much should have been reversed/not taken. In the absence of any other evidence, we accept the Chartered Accountant certificate produced by the respondent and hold that the respondent had sufficiently met with the requirements of maintaining separate accounts under Rule 6(2) and the Commissioner has correctly dropped all the demands. We, therefore, answer question (c) in paragraph 12 above in favour of the Respondent assessee and against the appellant Revenue. 29. To sum up, we find that the demands in the show cause ....