TaxTMI 
TaxTMI 
2024 (3) TMI 1170
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....ory for the taxable and exempted services in terms of rule 6(2) of the Cenvat Credit Rules (CCR), 2004. Since common input services have been used, an amount of 6% or 7% of the value of the exempted services in terms of Rule 6(3)(i) of the CCR 2004 is required to be paid by the appellant and accordingly, the authorities below have demanded and confirmed an amount of Rs.59,62,525/- for the period from July 2014 to June 2017 along with interest and equivalent amount of penalty has been imposed under Section 11AC of the Central Excise Act 1944. 3. The Learned counsel at the outset submitted that the audit was conducted in the month of July 2018 and based on the audit observations they were asked to pay Rs.59,62,527/- but the appellant resisting the demand vide letter dated 14.5.2018 paid only an amount of Rs.2,20,720/- as per the methodology prescribed under Rule 6(3A) of the CCR, 2004. Later, show cause notice dated 4.10.2018 was issued demanding an amount of Rs.59,62,525/- in terms of Rule 14 of the CCR, 2004 read with Section 11A of the Central Excise Act, 1944 which culminated into the impugned order which imposed penalty along with duty and interest. It is submitted that the o....
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....vice tax leviable thereon; or (ii) service, on which no service tax is leviable under Section 66B of the Finance Act; or (iii) taxable service whose part of value is exempted on the condition that no credit of inputs and input services used for providing such taxable service shall be taken but shall not include service which is exported in terms of rule 6A of the Service Tax Rules 1994. Admittedly, the goods that were being traded were not eligible for the benefit of CENVAT credit which is not disputed. 5.2 The relevant Sections of the CCR, 2004 are reproduced below: CENVAT CREDIT RULES, 2004 [Notification No. 23/2004-C.E. (N.T.), dated 10-9-2004 as amended] RULE 6. [Obligation of a manufacturer or producer of final products and a [provider of output service]]. - [(1) The CENVAT credit shall not be allowed on such quantity of input as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated....
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....credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services. Explanation 3. - For the purposes of this sub-rule and sub-rule (3A),- (a) "non-exempted goods removed" means the final products excluding exempted goods manufactured and cleared upto the place of removal; (b) "exempted goods removed" means the exempted goods manufactured and cleared upto the place of removal; (c) "non-exempted services" means the output services excluding exempted services.] [(3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely :- (a) the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :- (i) name, address and registration number 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 inputs and ....
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.... (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed, and (d) value of exempted goods removed, during the preceding financial year : Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted as G, where,- G = C - D; Explanation.- For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit. (vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv),....
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....A(Annual) + D(Annual)} - {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later; (e) where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider of output service, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount; (f) the manufacturer or the provider of output service, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} - {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later; (g) the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excis....
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....qual to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.] [(3C) * * * * ] (3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken. [Explanation I. - "Value" for the purpose of sub-rules (3) and (3A), - (a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made thereunder; (b) in the case of a taxable service, when the option available under sub-rules (7), (7A), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of service tax under section 66B of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; (c) in case of trading, sha....
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....ously dutiable and exempted goods, various alternatives were provided to the taxpayer and having chosen a particular option, they cannot avail any other option simultaneously and the amended provisions are also not being considered. In the present case, the appellant does not manufacture consciously dutiable and exempted products but at times, trades in goods that were found to be excess and therefore, he was liable to reverse the CENVAT credit availed on the traded goods which are nothing but exempted products. Since the audit officers have noticed this irregularity, the appellant having accepted it, they have reversed the proportionate credit as laid down by Rule 6(3A) of the CCR, 2004 which is one of the options provided to the tax payer. Therefore, the question of denying this option to the appellant is not acceptable. The Hon'ble High Court of Telangana Hyderabad in the case of Tiara Advertising vs. UOI (supra) had observed as follows: "6. At the outset, we may note that the Cenvat Credit availed by the petitioner during the relevant tax period was to the tune of Rs. 1,41,51,903/-. This included input tax credit availed upon output services which were subject to Servi....
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....mount of Rs. 17,15,489/- out of the total extent of Rs. 1,41,51,903/-. While so, the second respondent issued show cause notice dated 19-4-2016 to the petitioner proposing to choose the option under the aforestated Rule 6(3)(i) on its behalf and calling upon it to explain as to why it should not be directed to pay an amount of 5%, upto 31-3-2012, and 6%, from 1-4-2012, of the value of the exempted services, aggregating to Rs. 3,52,65,241/-. In its reply dated 16-5-2016, the petitioner contended that it was wholly unreasonable on the part of the authorities to expect it to pay over Rs. 3.50 Crore when the total Cenvat Credit availed by it was less than Rs. 1.50 Crore and the actual dispute boiled down to a mere Rs. 17,15,489/-. It relied on case law to support its contention that such an unreasonable result could not be allowed to follow by application of the law. 10-13 ......... 14. Further, we may reiterate that Rule 6(3) of the Cenvat Credit Rules, 2004, merely offers options to an output service provider who does not maintain separate accounts in relation to receipt, consumption and inventory of inputs/input services used for provision of output services which ....