TaxTMI 
TaxTMI 
2023 (2) TMI 1343
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.... with Explanation-III to sub-rule (3)/(3A), under Rule 14 of Cenvat Credit Rules, 2004 read with Section 11A(1) of the Central Excise Act, 1944. I further order appropriation of an amount of Rs. 61,76,635/- already paid by the assessee, against the aforesaid demand. 32.2 I order recovery of interest on the amount of demand confirmed in Para 32.1 above, under the provisions of Rule 6(3A)(e) read with Rule 14 of the Cenvat Credit Rules, 2004 readwith Section 11AA/11AB of the Central Excise Act, 1944. I further order appropriation of the amount of Rs. 52,567/- already paid by the assessee, against the aforesaid demand of interest. 32.3 I further impose a penalty of Rs. 8,62,06,300/- (Rupees Eight Crores, Sixty Two Lakhs, Six Thousand and Three Hundred only), on the assessee, i.e. M/s Thyssenkrupp Industries India Ltd., Pune, under the provisions of Rule 15(1) of Cenvat Credit Rules, 2004. 33. The said order is issued without prejudice to any other action that may be taken against the assessee under the provisions of the Central Excise Act, 1944 and/or the rules made thereunder and/or any other law for the time being in force." 1.2 Appeal No ST/85932/2015 ....
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....i, branch offices located at Chennai, "Delhi and Kolkata which are having separate legal entities and are maintaining centralized bills and accounts at Pimpri, Pune. They are also registered as an Input Service Distributor (hereinafter referred as 'ISD') with effect from 30-06-2008. 2.3 For the manufacture of goods and for providing the said output services, the assessee have been receiving various input services i.e. Management Consultancy, Consulting Engineer, CHA, Rent-a-cab, Advertisement, Transport of goods by road services, telephone, courier, security etc. at their Pimpri (Pune) factory and at their branch offices, site offices. Some of the services have been exclusively received and utilized in their Pimpri (Pune) Unit or turnkey projects undertaken by Pimpri (Pune) Unit. Some of the services have been received and utilized for Pimpri (Pune) & Hyderabad Unit. Some of the services have been received and utilized for common purposes. 2.4 Appellant undertake design, engineering, manufacture, supply, transport and erection & commissioning activities of various projects. They supply/sale duty-paid / non-duty paid materials, components, structural steel, parts, and ....
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....es used in or in relation to trading activities which is an exempted service (which is worked as per formula prescribed under Rule 6 (3A) (b) (iii) & 6 (3A) (c) (iii) as per condition (c) and (d)), should not be denied and recovered from them under rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944/ Section 73 (1) of the Finance Act, 1994 and inadmissible input service tax credit of Rs 60,93,784/- already paid/ reversed on input services used in trading activities should not be adjusted against the aforesaid inadmissible amount. (ii) Interest at the appropriate rate should not be demanded and recovered as per the applicable provisions (iii) Penalty should not be imposed in terms of Rule 15 (3) of the CENVAT Credit Rules, 2004. 2.9 Another Show Cause Notice dated 16.06.2014 was issued to appellant on the same ground for the period from April 2012 to March 2013, demanding inadmissible Cenvat Credit of Rs 7,94,80,900/- was issued to the appellant. 2.10 Bothe the show cause notices have been adjudicated as per the impugned orders referred in para 1 above. 2.11 Aggrieved by the impugned orders appellant has filed these a....
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....e undisputedly engaged in the activities of trading which is an exempted service; b) They are availing Cenvat credit of service tax paid on input services, which are used in the manufacture of dutiable goods, taxable services and exempted services at their Pimpri Unit; c) As they were unable to maintain separate accounts as provided under Rule 6 (3)(b), they have opted for option (ii) of Rule 6(3) of the CCR,2004 and have opted to pay the amount as determined under Rule 6(3A) ibid. d) They have reversed the amount provisionally every month in terms of Rule 6(3A)(b)(iii) ibid;" e) They have finally determined the amount of credit attributable to exempted service for the whole financial year i.e. 2011-12, as per their own ascertainment, and paid the same in terms of Rule 6(3A)(c) of the CCR, 2004. 21. The main issue therefore to be decided in these proceedings is as to. whether the assessee has correctly determined and paid the amount of credit attributable to the exempted services for whole financial year i.e. 2011-12, as per Rule 6 (3A) of the CCR, 2004. If not, what is the correct amount which was required to be paid by the assessee und....
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....he circumstances mentioned in sub-rule (2). 22.2.2 Further, sub-rule (2) of Rule 6 provides that where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services and manufactures such final products or provides such output services which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for the receipt, consumption and inventory of inputs used and/or for the receipt and use of input services in or in relation to the manufacture of exempted goods and dutiable final products or for the provision of exempted services and for the provision of output services excluding exempted services. The said sub-rule provides that the assessee shall take Cenvat credit only on inputs under subclause (ii) and (iv) of clause (a) and input services under subclause (ii) and (iv) of clause (b) of the said sub-rule (2). The said sub-rule (2) is reproduced below for easy reference: "(2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufacturers such final pr....
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.... procedure and conditions, namely:- (a) while exercising this option, 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... (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month, - (i) ... (ii) .... (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance upto the place of (E/F) removal or provision of exempted services (provisional) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c) the manufacturer of goods or the provider of output service, amount of CENVAT credit shall determine finally the attributable to ....
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....empted goods manufactured and removed; (III) P = Total Cenvat credit taken on input services during the financial year. 23.2 I, therefore, find that the duty demanded in the impugned SCN has been correctly worked out in terms of the aforesaid formulae and hence the categories of the exempted service have no relevance with the computation of the duty demand. 24. The assessee in their submissions have also contended that there are computation errors in the working of the duty demand. The assessee have contended that the value of dutiable goods manufactured and removed as shown under the factor "N", should have been Rs. 360,24,98,262/-instead of Rs. 172,23,69,388/- as considered by the Department in the impugned S.C.N. According to them, the amount of Rs. 360,24,98,262/- includes the value of dutiable goods removed from their Pimpri, Hyderabad and other various sites, whereas the Department has considered the dutiable goods removed by the Pimpri unit alone. They have further stated that the value of dutiable goods cleared from the Pimpri unit should have been considered as Rs. 175,60,76,814/- as against Rs. 172,23,69,388/- considered in the impugned S.C.N. ....
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....ld that the amount of Rs. 172,23,69,388/- has been correctly considered, and reject the assessee's contention that the total turnover Rs. 360,24,98,262/- of all the units/factories/sites merited consideration for calculating the assessee's duty liability. 24.3 In this regard, I rely upon the decision of Hon'ble CESTAT in the case of Commissioner of Central Excise, Guntur V. Integral Construction Company [2010 (17) S.T.R. 380 (Tri. Bang.)], wherein the Tribunal has held as under:- ..... 25. The assessee in their submission have also contended that the whole basis for computation of the demand of Rs. 8,62,06,300/- is wrong on account of the following facts: (i) The total input service tax credit has been considered for calculating the pro-rata credit attributable to exempted services. The total input service tax credit taken during the subject period is Rs. 22,75,99,680/- has been taken for such a working, instead of considering service tax credit taken only on "Common" input services to the extent of Rs. 2,04,87,485/-, as provided in the said Rule 6 (3)(ii) of CCR 2004. (ii) The dutiable turnover relating to Pimpri unit to the....
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....I Vs. Neminath Fabrics Pvt. Ltd. [2010 (256) E.L.T. 369 (Guj.)], wherein the Hon'ble Court has held that no canon of interpretation permits exercise of rewriting statutory provision. The relevant para of the said judgement is reproduced below for easy reference :- "16. The termini from which the period of "one year" or "five years" has to be computed is the relevant date which has been defined in sub- section (3)(ii) of Section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub-section (1) of Section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute, such right cannot be available to a statutory Tribunal." 26. The assessee in their submissions have also contended that the total Cenvat credit of Rs. 22,78,34,139/- has been considered in the SCN (as factor "P"), whereas it should have been Rs. 2,04,87,485/- only, in as much as, out....
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....ly for dutiable final products or taxable output services, as contended by the assessee. It is only the turnover of such Cenvat credit which has been considered for determining the quantum of the Cenvat credit attributable to the exempted service as provided under Rule 6(3A)(c)(iii) of the CCR, 2004. This turnover has been correctly considered as discussed by me in Paras 25.2 and 25.3 above. The contentions made by the assessee are therefore factually incorrect and hence liable to be rejected. 26.2 I find that the assessee have contended to have partially complied with the provisions of Rule 6 (2) (b) i.e. compliance to the extent of sub- clauses (ii) and (iv) of the said Rule. However, they have failed to comply with the requirements of sub-clauses (i) and (iii) and to follow the important condition of the said Rule of not taking credit on common input services. They were, therefore, not eligible for availing of the procedure prescribed under Rule 6(2) and correctly opted for Rule 6 (3)(ii). Once they have opted for Rule 6(3)(ii), it was obligatory upon them to follow the procedure as prescribed under Rule 6 (3A), in totality, and to work out the amount payable by them at....
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....view of the foregoing discussions, I find that the amounts for the three parameters of the formula as per Rule 6(3A)(c)(iii) of the CCR, 2004, works out as under :- i. "M" viz., the total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year 2011-12 Rs. 2,61,44,28,489/- ii. "N" viz., the total value of taxable (output) and exempted services provided and total value of dutiable and exempted goods manufactured and removed during the financial year 2011-12 Rs. 6,90,96,58,182/-, iii "P" viz., total CENVAT credit taken on input services during the financial year 2011-12 Rs. 22,78,34,139/- 28.1 Accordingly, the amount attributable to input services used in or in relation to provision of exempted services, as per the formula (M/N) XP, works out to Rs. 8,62,06,300/-, as detailed under :- Rs. 2,61,44,28,489/- X Rs. 22,78,34, 139/- Rs. 8,62,06,300/- Rs. 6,90,96,58,182/- 29. Thus, to sum up, I find that the assessee have availed the Cenvat credit on certain common input services, which have been used in relation to the manufacturing activity as well as provision ....
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.... in rendering taxable output services. 15. In order to appreciate contentions, it will be appropriate to refer to the relevant provisions of Rule 6 of the Rules and it is as follows: "Rule 6. Obligation of a manufacturer or producer of final products and a provider of taxable service. - (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 services, or input service used in or in relation to the manufacturer of exempted goods and their clearance upto the place of removal or for provision of exempted services except in the circumstances mentioned 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) ******** (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow any one of th....
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....imate 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 output 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 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 output servic....
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....l is regarding the interpretation of the term total Cenvat credit provided in the formula in Rule 6(3A)(b)(ii). According to the Department, the total Cenvat credit should include even those services used exclusively in taxable services, including the common service while according to the appellant it should include only common input services and services used in exempted services and not the services used exclusively in rendering taxable output service. 18. It would be clear from a conjoint reading of sub-rules 6(1), (2) and (3) of Rule 6 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 dutiable goods. 19. This position is also clear from the underlying object of the amendment made in Rule 6(3A) of the Rules by Notification dated March 1, 2016, to consider only common input services and not total input service credit, for the purpose of computing the amount of reversal. 20. Such amendment was also clarified by the Tax Research Unit Circular dated February 29, 2016 to apply retrospectively in....
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.... Order No 51518-51519/2021 dated 25.05.2021, following has been held: "26. It is clear from the above, that the final amount to be debited as inadmissible CENVAT credit under Rule 6(3A) is D=(E/F)xC where, E represents the sum of value of exempted goods and exempted services, F represents the sum of value of exempted and dutiable goods as well as exempted and nonexempted services. 'C' is calculated as C = T -(A+B) where T is the total credit taken, A is the credit on inputs and input services used exclusively in the exempted goods and exempted services and hence ineligible and B represents the credit on inputs and input services used exclusively in dutiable goods and nonexempted services. In other words, C represents only the credit taken on the common inputs and input services. 27. In the present appeals, the appellant has taken no credit on inputs or input services used exclusively for exempted services and had taken credit only on the inputs and input services used in manufacture of dutiable goods. The only dispute is regarding the credit on common input services used in their headquarters which was transferred to the field units through ISD invoices. This cred....
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....ability on the output goods or services. If they are not chargeable to duty or tax, one cannot take credit either. However, there are those who produce both dutiable and exempted goods and taxable and exempted services. Rule 6(2) deals with such situations and requires such a person to maintain separate records and take credit only the inputs and input services which are used for manufacture of dutiable goods or provision of taxable services. However, if one produces both dutiable and exempted goods and provides both taxable and exempted services and chooses not maintain separate records, Rule 6(3) gives different options of paying an amount as a percentage of the value of the exempted goods and services or reversing an amount of credit taken. In the factual matrix of this case, the appellant has followed Rule 6(2) and maintained separate records and has not taken credit on the inputs and input services used in provision of exempted service viz., trading and has taken credit only on the inputs and input services used in manufacture of dutiable goods. 31. However, there are some services used in the headquarters office of the appellant which cannot be attributed completely ....
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....l CENVAT credit' provided under the formula. If the whole Rule 6(1)(2)(3) is read harmoniously and conjointly, it is clear that 'total CENVAT credit' for the purpose of formula under Rule 6(3A) is only total CENVAT credit of common input service and will not include the CENVAT credit on input/ input service 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 the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of CENVAT Credit Rules, 2004. (emphasis supplied) 33. Since the appellant has followed Rule 6(2) and has not taken any CENVAT credit on the input services which were used exclusively for providing exempted services, the formula under Rule 6(3A) can only be used to only proportionately divide the credit taken on common input services and deny credit to the extent it is attributable to the exempted service viz., trading during the periods relevant to both appeals, viz., 2015-16 and April 2016 to June 2017. 34. To sum up, the main basis on which the demands were raised in both the Show Cau....