2022 (6) TMI 468

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.... challenge to the setting aside of recovery of Rs. 11,22,656 for 2013-14, along with the penalty of Rs. 34,68,125 under rule 15 of CENVAT Credit Rules, 2004, for being barred by limitation. During 2014-15, the appellant had rendered services valued at Rs. 354,78,35,104 of which Rs. 9,57,75,175 was attributable to 'trading' and credit of Rs. 13,32,09,285 availed by them was sought to be curtailed by Rs. 35,96,036 instead of Rs. 12,50,567 acknowledged in the reversal effected by them.  According to the tax authorities, only credit to the extent that the value of 'taxable services' bore to the value of 'total services' could be retained; the assessee reversed credit in such proportion as the value of the 'exempt service' bore to the value of 'taxable service' for the relevant year. 2. Before proceeding to consider the submissions on behalf of the appellant and of Revenue, enunciation of the source of the varying interpretation of the statutory measure for adjustment may well be warranted. Credit, validly availed upon procurement of 'input service', may carry the taint of subsequent ineligibility from deployment in rendering of 'exempted service' or manufacture of 'exempted goods....

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....or stay of recovery pending decision on the appeal did not warrant anything other than a preliminary survey of the law and, thereby, depriving it of status as binding precedent. The impugned order has, with its emphasis on the formula, held that '.. The amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance up to the place of removal 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 output 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. Thus, the term used in the rule is 'total CENVAT credit taken on input services' and is not common input services. The appellant, while calculating the amount, have taken into consideration the common input service instead of total cenvat credit. Term 'P' has been interpreted case of Thyssenkrupp industries (I) Pvt. Ltd Vs. Commissioner of C. E....

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....t Rules, 2004. Rule 6 of CENVAT Credit Rules, 2004 is not, by any stretch, a substitute for either rule 3 or rule 14 of CENVAT Credit Rules, 2004; it affords neutralization, without attendant detriment, of credit that, validly availed upon procurement of input/input service, transforms, owing to subsequent deployment, as ineligible for continuance which is made abundantly clear in ' (1) The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted service, or input service used in or in relation to the manufacture of exempted goods and their clearance up to the place of removal or for provision of exempted services, except in circumstances mentioned in sub-rule (2);' in rule 6 of CENVAT Credit Rules, 2004 and acknowledges the possibility of input/input service used in common for rendering 'output service' or in manufacture of 'output' as well as for rendering 'exempted service' or in production of 'exempted goods' which must be reversed or regularized. Intrinsic to such reversal is the maintenance of separate accounts of deployment in terms of eligibility/ineligibility as prescribed in r....

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....e exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004.' The said dispute did not arise in the context of rendering 'taxable' and 'exempt' service but in relation to goods of which some were non-dutiable; the context of applicability of the formula is slightly at variance with that in the impugned order. Nevertheless, disaggregation of 'input service' has been approved therein. 9. In E-Connect Solutions (P) Ltd v. Commissioner of Central Excise & CGST, Udaipur [2021 (376) ELT 678 (Tri-Del)], disputation over the meaning of 'total CENVAT credit' in rule 6(3A) of CENVAT Credit Rules, 2004 was brought before the Tribunal and it was held that '18. It would appear from a conjoint reading of sub- rules 6 (1), (2) and (3) that the total Cenvat credit for the purpose of formula under Rule 6 (3A) is only total Cenvat credit of common input service and cannot include Cenvat credit on input service exclusively used for the manufacture of dutiab....