TaxTMI 
TaxTMI 
2023 (8) TMI 1140
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....eal on the following substantial question of law:- "A. Whether in the facts and circumstances of the case the CSTAT was right in holding that the amendment to Rule 6 of the CENVAT Credit Rules, 2004 retrospectively amended by the Finance Act, 2010, was applicable in the present case in the light of the provisions of Section 73 of the Finance Act, 2010 ?" 3. The controversy in the present appeal revolves around the purport and applicability of Rule 6 of the Cenvat Credit Rules, 2004 (for short 'CCR, 2004') under which the duty demand was raised against the respondent. Rule 6 provides for obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. At the outset, it would be necessary to note Rule 6 of the CCR, 2004 as it stood prior to its amendment in the year 2008 and post the amendment in the year 2008 which reads thus:- "Rule 6 prior to 2008 amendment 6. Obligation of a 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 t....
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....5; (4) No. 64/95-Central Excise, dated the 16th March, 1995, G.S.R. 256(E), dated the 16th March, 1995; [(viii) Liquefied Petroleum Gases (LPG) falling under tariff items 2711 12 00, 2711 13 00 and 2711 19 00 of the said First Schedules] (ix) Kerosene falling within heading 2710 of the said First Schedule, 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 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)....
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....ovided during the financial year, and Z denotes total CENVAT credit of inputs and input services taken during the financial year; (d) pay an amount equal to the difference between the amount determined: as per item (c) and the amount determined as per item (a), on or before the 30th June of the succeeding financial year, where the amount determined as per item (c) is more than the amount paid; (e) 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 item (c) is less than the amount determined and paid as per item (a), adjust the excess amount on his own, by taking credit of such amount; (iv) the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of such payment or adjustment, the following particulars, namely: (a) details of CENVAT credit attributable to exempted services, month wise, for the whole financial year, determined provisionally as per part (iii) item ....
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....) 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 the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone; or (ii) cleared to a hundred per cent export-oriented undertaking; or Rule 6 Post Amendment in the year 2008 6. Obligation of a manufacturer of dutiable and exempted goods and provider of taxable and exempted services. 6.(1) The CENVAT credit shall not be allowed on such quantity of input or input service which used in the manufacture of exempted goods or [for provision of] exempted services, except in the circumstances mention 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 i....
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....l 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)= (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 ....
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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 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 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, monthwise, for the whole financia....
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.... 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-clauses (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 the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone; or (ii) cleared to a hundred per cent export-oriented undertaking; or (iii) cleared ....
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....rch Institutions / Universities. The respondent maintains separate account in respect of the inputs used in the manufacture of exempted goods. The respondent contends that it does not take any credit of duty paid on such inputs. 5. The case of the department is to the effect that during the course of an audit of the respondent, it was revealed that the respondent had availed and utilized service tax credit of common services like Chartered Accountant, cleaning activity, courier agency, event management, outdoor caterer, on-line information and telecommunication services, also the respondent's PAC unit registered as a Input Service Distributor has distributed service tax credit on Advertising Agent's Service, Commercial Coaching Services, Courier services, Online information & Database Access Service, Photography Services, Rent-a-cab services, telecommunication Services, Tour operator's services, External Borrowings etc. among other input and input services. 6. It is the Department's case that the respondent had manufactured dutiable excisable goods as well as exempted goods, consuming common Cenvated inputs and input services as also had maintained separate accounts in respect of....
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.... on the above mentioned amount of Rs. 32,39,35,223/-; (iv) the amount of Rs. 17,49,730/-(Rupees Seventeen lakhs forty nine thousand seven hundred thirty only) already paid by them should not be appropriated against the interest payable as under (iii); and (v) Penalty should not be imposed upon them under Section 11AC of Central Excise Act, 1944 read with Rule 15 of Cenvat Credit Rules, 2004 for contravention of Rule 6(3)(b) of the Cenvat Credit Rules, 2004 prior to 1 April 2008 and Rule 6(3) (i) of the Cenvat Credit Rules, 2004 w.e.f. 1 April 2008. 9. The respondent submitted its reply dated 8 July 2011 to the show cause notice, interalia contending that the respondent had correctly availed the Cenvat credit in respect of service tax paid on the common inputs and input services pertaining to exempted goods, and that there was no suppression of facts to evade payment of duty by intentionally availing wrong Cenvat credit. It was contended that the respondent was maintaining project-wise record of purchases and input services and that they had reversed Cenvat credit in proportion of turnover of excisable and exempted goods. 10. After hearing on the show cause notice, the Commiss....
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....r to 1 April 2008. Also the respondent had not submitted any application to the Commissioner of Central Excise, opting to pay the amount in accordance with the provisions as amended by the Finance Act, 2010. The dispute was in respect of a period April, 2006 to December, 2010 which has arisen on 3 March 2008 and it was not confined to the period enumerated under the Schedule to Section 73 of the Finance Act, 2010 and in this view of the matter the amendments / provisions of the said section were not applicable in the instant case. 12. The respondent reversed the credit of Rs. 1,28,63,305/- along with interest of Rs. 87,31,339/- for the period 2006-07 and 2007-08 on 17 February 2012 towards the input service tax credit availed by the appellant on the common input invoices in proportion to the exempted turnover as per the following details: Period Service Tax credit reversed Interest paid 2006-2007 Rs. 94,47,011 Rs. 67,59,172 2007-2008 Rs. 34,16,294 Rs. 19,72,167 Total Rs. 1,28,63,305 Rs. 87,31,339 13. In pursuance to such reversal, the respondent by its letter dated 20 February, 2012, intimated to the revenue such facts as also enclosed ....
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....Rule 6 as it stood prior to its amendment in the year 2007-2008, and post amendment as amended in the year 2008. The CESTAT has observed that as per the provisions of Rule 6 of the CCR 2004 as amended from time to time in case of common input / input services used for manufacture of both exempted and dutiable goods, the respondent had reversed the entire amount of proportionate credit alongwith interest due in respect of the period 1 April 2008 to 31 December 2012 even prior to issuance of a show cause notice, and in respect of the period prior to 1 April 2008, as per the provisions of Rule 6 the respondent was required to pay 10% of the value of the exempted goods, if it was not in a position to maintain separately account in respect of inputs / input services used for manufacturing of exempted and dutiable goods. In that regard, it was observed that as held by the Supreme Court in Union of India & Ors. vs. Hindustan Zinc Ltd. 2014(303) ELT 321 (S.C.), the benefit of proportionate reversal was extended from retrospective effect, in cases where common inputs/ input services were used for manufacture of dutiable and exempted products and thus, there was nothing illegal in the respon....
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....iii) of the CCR, 2004 were not applicable in the case of the assessee as they never followed the procedure and conditions laid down in Rule 6(3A) of the CCR, 2004. 17. On the other hand, learned Counsel for the assessee has supported the impugned decision. He submits that the findings as recorded by the CESTAT are on appropriate interpretation of Rule 6 of the CCR, 2004 as amended from time to time and as applicable in the facts of the present case. It is submitted that the CESTAT has appropriately held that the respondent had appropriately reversed the entire amount of proportionate credit alongwith interest in respect of the period from 1 April 2008 to 31 December 2010, as also in respect of the period prior to 1 April 2008, the respondent was permitted the benefit of proportionate reversal with retrospective effect, as rightly accepted by the CESTAT on interpretation of the amendment as brought about to Rule 6 (3A) of the CCR, 2004 by the Finance Act, 2010. 18. We have heard learned Counsel for the parties and with their assistance we have perused the record. 19. At the outset we may note that the periods subject matter of the show cause notice in question are the periods beg....
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....uts 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 the aforesaid condition (a), the manufacturer shall pay an amount equal to 10% 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, and (c) the provider of output service shall utilize credit only to extent of any amount not exceeding 20% of the amount of service tax payable on taxable output service. 22. Rule 6, however, underwent an amendment in the year 2006, 2007 and in the year 2008. It is relevant to note the amendment as brought about to subrule (3) and incorporation of Rule 3A as extracted by us above. 23. It is clearly seen from the reading of sub Rule (3A) of Rule 6 which was introduced for determination of payment of amount payable under clause (ii) of sub-rule (3), that the manufacturer of goods or the provider of output service shall follow the procedure and conditions as set out therein. Further Rule 6....
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....of Rs. 1,22,98,068/- plus Rs. 17,49,730/-. Insofar as the revenue's contention in assailing the impugned order passed by the CESTAT is concerned, we are not persuaded to accept such contention that the amendment as brought about to Rule 6 by the Finance Bill,2010 was applicable in the case where the show cause notice was issued and/or pending on the date on which it was received assent by the President. Thus, what was imperative was not issuance of a show cause notice but the pendency of dispute relating to adjustment of credit of input used or exemption on final product relating to the period beginning from 10 September 2004 and ending on 31 March 2008 (both days inclusive), being the pending date on which the Finance Bill received assent of the President. It is rightly observed by the CESTAT that when for such period the dispute has arisen only in such event, a show cause notice was issued and hence, the case of the respondent for the period 2007-08 was covered by the amendment made by way of insertion of subrule (7) of Rule 6 of CCR, 2004 by the 2010 Amendment. 27. This apart, we find that the respondent would be correct in its contention when it submits that in a similar situa....