TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 12
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....1.4.2008. The issue in dispute as stated by the appellant is whether retrospective effect can be given to the option filed by the taxpayer on 14.10.2010 under Rule 6(3)(ii) of CENVAT Credit Rules, 2004. The Learned Commissioner after having put the appellant to notice, has vide his order No LTUC/296/2012-C dated 11/09/2012 come to the conclusion that as per a clear reading of the Statute the option filed by the appellant under Rule 6(3)(ii) of CCR, 2004 is effective only prospectively. He also further held that when the taxpayer has claimed that they are maintaining separate set of accounts for exempted and taxable services as per the option under Rule 6(2) of CENVAT Credit Rules, 2004, and are taking credit of only those input services used in taxable services for discharge of duty related to taxable services, they cannot simultaneously avail the option under Rule 6(3) for credit of common input services used for both exempted and taxable service. He has confirmed duty with interest and also imposed a penalty as per relevant Rules. Aggrieved by this order, the appellants are before us. 3. We have heard Ms. Krithika Jaganathan, Advocate on behalf of the appellant and Ms. K. Komath....
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....n 2021 (44) GSTL 271 (Tri. Del.) 6. Revenue on the other hand, have after taking us through Rule 6(3A)(v) of CENVAT Credit Rules, 2004 stated that taxpayer desiring to avail the said option should declare the amount lying to the credit in the CENVAT account on the date of exercising the option. There is no scope for ambiguity while interpreting the words 'on the date of exercising the option' and the legislative intent in this regard is clear i.e. option exercised takes effect only from the date it is filed. Hence the learned AR pleaded that the option filed during October 2010 by the taxpayer under Rule 6(3)(ii) of CENVAT Credit Rules, 2004 can be held effective only prospectively. They have relied on the judgment of the Hon'ble Supreme Court in the case of M/s. Eagle Flask Industries Ltd. Vs. CCE, Pune reported in 2004 (171) ELT 296 (SC) in Civil Appeal No. 4647/1998 to state that any declaration or undertaking to be submitted by an assessee has to be mandatorily done. It is the foundation for availing the benefit and cannot be said to be merely procedural with no consequences attached to non-observance. The learned AR further stated that even on merits, as per the provision....
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.... examined these issues and given his considered decision in a very detailed manner at paras 9 and 10 of the impugned order, leaving no room for ambiguity. We may add that Rule 6 of CCR 1994 as it stood on 1.4.2008, lists out the obligations of manufacturer of dutiable and exempted goods and provider of taxable and exempted service. Rule 6(1) disallows credit to be availed on input or input services which are used in the manufacture of exempted goods except if the circumstances mentioned in sub-rule (2) are satisfied. Hence the very availment of credit with respect to exempted goods can only commence after satisfying the requirements of sub-rule (2). Sub-rule (2) requires a manufacturer or provider of output service to maintain separate accounts for receipt, consumption and inventory of input and output service meant for use in the manufacture of dutiable final products or in providing output service and take CENVAT credit only on that quantity of input or input services which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable i.e. the accounts would be maintained manufacturer / service provider wise and not indivi....
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....ications of payment of duty. The service provider has to calculate and pay, provisionally, for every month, the amount attributable to exempted services, as per the formula given under Rule 6(3A)(b) of CCR, 2004. This is not an empty formality to term the provision as procedural. Credit taken into their books by assessee's are as good as liquid cash for the purpose of payment of duty and requires a system of checks and balances to ensure their proper and lawful utilization as per the scheme of the Act and Rules. Allowing every assessee the freedom to make the declaration whenever he chooses, even retrospectively after the statutory monthly returns are filed and then reversing credit at will to claim compliance with the Rules will lead to lack of finality in assessments, encourage attempts to evade duty and create administrative difficulties in effectively monitoring and implementing the CENVAT scheme. In the circumstances it is difficult to hold that non-compliance with the procedures and conditions of Rule 6 as non-mandatory. The Hon'ble Supreme Court while examining a similar issue, in its judgement in the case of M/s Eagle Flask Industries Vs CCE, Pune [2004 (171) ELT 0296 (....
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.... only to state that sub-rule (1) should not be read in isolation. In the present case, we are faced with a situation where the appellants have several common inputs/input services. For some of them, they followed sub-rule (2) and maintained separate accounts and for some others they have followed Rule 6(3). Rule 6(3) allowed credit on common input services notwithstanding the provisions of Rule 6(1) or Rule 6(2). The appellant's claim is that Rule 6(2) and Rule 6(3) can operate concurrently. We are not in agreement with such a proposition. Both sub-rule (2) and (3) of Rule 6 talk about "manufacturer" or "provider of output services". The said sub-rules do not talk about the service wise maintenance of accounts. It is with reference to "manufacturer or "provider of output service". As already noted, sub-rule (1) absolutely prohibits availing Cenvat credit on input service which is used in the manufacture of exempted goods or exempted services except in the circumstances mentioned in sub rule (2). In other words, it is very clear that plenary provision of sub-rule (1) is giving exception to a situation envisaged in sub-rule (2). Sub-rule (2) is for a 'manufacturer' or 'provider of ou....
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.... submitted that they were not hit by restriction of 20% in utilizing credit on tax liability of final output services, on the ground that total credit availed under sub-rule (3) falls short of the same. We note this claim is misleading and ignoring the fact that they have maintained separate accounts and availed full credit in respect of common input services attributable to taxable output services in terms of sub-rule (2). In other words, it would lead to a situation where the assessee can choose to maintain separate account in respect of common input services under sub-rule (2) and, at the same time, follow sub-rule (3) in respect of a few of the common input services so that the bar of 20% utilization of credit on final tax liability can be avoided. We find the present situation is against the basic principle of CCR. We are of the considered opinion that in respect of common input services for which the appellant is entitled to credit they have an option either to follow sub-rule (2) or sub-rule (3). Following both selectively in respect of selective common input services is against the basic principle and the legal bar under sub-rule (1). Accordingly, we hold that the original ....