2023 (10) TMI 1081

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.... Credit Rules, 2014 is to be undertaken by an assessee and the extent of mandate available for the authority competent to order recovery under section 11A of Central Excise Act, 1944. Admittedly, the appellant had reversed credit of 95,77,184, in two tranches on 31st May 2012 and 1st June 2012, that, according to them, was obligated, in terms of rule 6 of CENVAT Credit Rules, 2004, on ineligible activity for 2011-12 which, however, was held as not having been performed when due and, thus, warranting application of 'default option' - coincidentally, the most detrimental - by the adjudicating authority. 2. The root of the controversy lies in the contribution of 'trading' to the topline of the appellant for the disputed period which, not being either 'manufacture' or 'service', disentitled them to offset of credit of tax paid on 'input service' used in common to the extent attributable to ineligible activity towards duties and taxes leviable on 'excisable goods' manufactured by them or 'taxable services' rendered by them. While the taking of credit, in terms of rule 3 of CENVAT Credit Rules, 2004, was in order, and indeed not disputed, a bar on retention of such credit in the pool ....

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....option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II.- For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services. Explanation III - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services.' of CENVAT Credit Rules, 2004. 4. The appellant is a manufacturer of 'equipment for heating, cooling and separation' and, having procured certain 'taxable services' during 2011-12, proceeded to take credit of tax in the said invoices as permissible under rule 3 of CENVAT Credit Rules, 2004. Trading volumes for the period was reported as Rs. 2,32,21,99,414 and the impugned recovery of ....

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....ral Excise, Nagpur [1996 (81) ELT 3 (SC)] and of the Hon'ble High Court of Allahabad in Hello Minerals Water (P) Ltd v. Union of India [(2004) 174 ELT 422 (ALL)], as discharge of tax liability. That, as well as the finding therein that this was a permitted option even if not intimated to jurisdictional authorities, was claimed to have been set out in the order of the Tribunal in Mercedez Benz India (P) Ltd v. Commissioner of Central Excise, Pune-I [(2015) 40 STR 381 (Tri-Mum)] and in New Bharat Ventures Limited v. Commissioner of Central Excise Customs and Service Tax [(2021) SCC Online CESTAT 2700 (Tri-Hyd)] besides a catena of other rulings. Insisting that they had taken recourse to the correct manner of computation for reversal of Rs. 2,02,37,716, comprising Rs. 1,06,60,532 at 5% of value of 'exempted service' and disaggregation of Rs. 95,77,184, it was contended that 'trading' value was Rs. 73,43,01,782 and credit of Rs. 4,23,62,663 pertaining to 'input services' having been availed in entirety for 2011-12, owing to which Learned Counsel submitted there was no short-payment at all. 7. Learned Authorized Representative drew attention to rule 6 of CENVAT Credit Rules, 2004 to ....

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....three options have been provided under Rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub-rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub-rule (3)(ii), we find that foremost condition is that the appellant is required to pay an amount as per the formula provided under sub-rule (3A) on monthly basis. However, we find that as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount was required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under sub-rule (3A) of Rule 6, therefore to fulfill the condition, assessee should pay the said amount, which has been complied by the appellant. 5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the complianc....

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....pulsorily made applicable, therefore we are of the view that Revenue could not insist the appellant to avail a particular option. In the present case admittedly it is appellant who have on their own opted for option provided under Rule 6(3)(ii). The meaning of the option as argued by the Ld. Sr. Counsel is that "option of right of choosing, something that may be or is chosen, choice, the act of choosing". From the said meaning of the term 'option', it is clear that it is the appellant who have liberty to decide which option to be exercised and not the Revenue to decide the same.' 9. Thus, it is clear that exercise of option vests entirely with assessee at any stage and proceedings under rule 14 of CENVAT Credit Rules, 2004 would have to be restricted to that which is least detrimental to the assessee. 10. The appellant, even if belatedly, has discharged obligation claiming that to be that contemplated in rule 6 of CENVAT Credit Rules, 2004. In terms of the decision of the Hon'ble Supreme Court in re Chandrapur Magnet Wires (P) Ltd holding that '7. In view of the aforesaid clarification by the Department, we see no reason why the assessee cannot make a debit entry in ....

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.... and also the decision of the larger five Members Bench of the Tribunal in the case of Franco Italian Company (P) Limited (supra) and other larger bench decision in the case of ICON Pharma and Surgical (P) Ltd. - 2000 (40) RLT 918 has held that reversal on inputs credit should have been done before removal of the bottles. In our opinion the Tribunal has completely misunderstood the decision in the case of Chandrapur Magnet Wires Ltd. (supra) in which the Supreme Court has quoted the Circular issued by the Ministry of Finance, being Circular No. 22/8/86, dated 10-4-1986. In Para 5 of the said Circular it was mentioned that the duty paid in the inputs used should be debited, before removal of such exempted final products. Since the Circular in that case required reversal of the credit before removal of the final product, hence the Supreme Court interpreting the said circular has mentioned that they see no reason why the assessee cannot make debit entry before removal of exempted final products. 21. In the present case for the purposes of claiming the benefit of the Notification No. 15/94-C.E., dated 1-3-1994 neither any circular has been issued nor the said circular of 1986 ....