TaxTMI 
TaxTMI 
2023 (2) TMI 1343
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....ule 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 is directed against the order in original No PUN-EXCUS-001-COM-040-14-15 d....
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....intaining 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 machinery etc. for the said projects, which are either cleared from their manufacturing units or from the premis....
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....ule 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 appeals. 3.1 We have heard Shri Shailesh P Seth, Advocate for the appellant and Shri Amrendra Kumar Jha, Deputy Commissioner, authorized representa....
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.... 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 under Rule 6(3A)(c)(iii) ibid, after finalization. 22. Before proceeding to discuss the assessee's contentions, I reproduce below the extracts of relevant Rules of Cenvat Credit Rules, 2004, for easy reference: 22.1 Rule 2(e) of the CCR, 2004 defines "exemp....
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....ds 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 products or provides such output service 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 (a) the receipt, consumption and inventory of inputs used - (i) in or in relation to the manufacture of exempted goods; (ii) in or in relation to the ....
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....anufacture 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 exempted goods and exempted services for the whole financial year in the following manner, namely:- (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 removal or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of ta....
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....emoved 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. 24.1 I find that the above submissions of the assessee is not acceptable. In this regard, I refer to the definition of the "assessee", given in Rule 2(c) of Central Excise Rules, 2002 (this reference is aptly drawn in terms of Rule 2(t) of the CCR, 2004). Accordingly, an assessee means... "assessee" means any person who is liable for payment of duty assessed or a producer or manufacturer of excisable goods or a registered person of a private warehouse in which excisable goods are stored and includes an authorized agent of such person; 24.2 I find that the term 'assessee' in....
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....nd 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 extent of Rs. 172,23,69,388/- (correct amount is Rs. 175,60,76,814/-) alone has been considered in the working annexed to show cause notice instead of considering the turnover of Rs. 360,24,98,262/- which is as per their working, which has also led to the difference in arriving at the excess pro rata cenvat credit reversal sought by the department in the impugned show cause notice. 25.1 In short, the assessee has challenged the values of factors "P" and "N" of the formula provided under Rule 6(3A)(c)(iii) of the CCR, 2004. I have already dealt with their contention with regards to factor "N", in Para 24.2 above, holding that the dutiable ....
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.... 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 of the total cenvat credit of Rs. 22,75,99,680/-, Rs. 20,71,12,194/- pertains to Cenvat credit of input services used exclusively for dutiable final products or taxable output services for which there is 100% admissibility, and only balance cenvat credit of Rs. 2,04.87.486/- is attributable to credit availed on common input services. No part of such legitimate cenvat credit availed can be denied, since none of the provisions of Rule 6 (1) or Rule 6 (2) or Rule 6 (3) r/w 6 (3A) is applicable to such services, as such input service credit has been availed by virtue of Rule 3 r/w Rule 2 (1) and Rule 9 of CCR 2004. The assessee have contended that consideration of the entire cenvat credit of ....
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....ve 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 the end of the financial year strictly as provided under Rule 6 (3A)(c)(iii) of the CCR, 2004, and there was no scope for deviation from the procedure prescribed therein. It is not permissible under the provisions of Rule 6 of the CCR, 2004 to partially follow the procedure under sub-rule (2), and simultaneously for the remaining portion to opt for the procedure under sub-rule (3)/(3A). I, therefore, hold that it is obligatory upon the assessee, who have taken Cenvat credit on common input services, to follow any of the options of Rule 6 (3) read with Rule 6(3A) in respect of entire activities of their Pimpri unit, on account of their failure to maintain separate accounts for receipt and use of input s....
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....on 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 of exempted services, i.e. trading activities and since they have admittedly not maintained separate accounts, as required under the provisions of Rule 6(2), they have opted for the procedure as prescribed under Rule 6(3A) of the Cenvat Credit Rules, 2004. They were, therefore, required to pay the amount as determined in terms of Rule 6(3A)(c)(iii) of the CCR, 2004. However, it is found that the assessee failed to correctly determine and pay the amount as provided under Rule 6(3)(c)(iii) of the CCR, 2004. Thus, the amount of Rs. 8,62,06,300/-. as determined in para 28.1 above, is liable to be recovered in the manner as provided under Rule 14 for recovery of Cenvat credit wrongly taken, in view of ExplanationIf below sub-rule (3D) of Rule 6 of Cenvat Credit Rules, 2004, which clearl....
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.... 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 the following options, as applicable to him, namely:- (i) pay an amount equal to six per cent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment : Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i) : Provided further tha....
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....sional) = (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 services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance upto the place of removal or provision of exempted services (provisional) = (E/F) 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 output 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." 16. Rule 6(1) of the Rules curtails the service provider from availing Cenvat credit on input services used for exempted services. This clearly means....
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....t 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 inasmuch as the clarification clearly mentions that the provisions of Rule 6 providing for reversal of credit in respect of input services used in exempted services, is being redrafted with the objective to simplify and rationalize the same without altering the established principles of reversal of such credit. It has been further clarified at paragraph (iv) of the Circular that the purpose of the rule is to deny credit of such part of the total credit taken, as is attributable to the exempted services and under no circumstances this part can be greater than the whole credit. 21. In this connection, reference can be made to the decision of the Tribunal in Reliance Industries, wherein while dealing with a similar issue, the Tribunal held that the term total Cenvat credit taken on input services in the pre-amended rule is only total Cenvat credit of common service and will not include the Cenvat credit on input/input services exclusively used for the manufacture of dutiable goods. The releva....
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....ute is regarding the credit on common input services used in their headquarters which was transferred to the field units through ISD invoices. This credit cannot be attributed wholly to either the dutiable goods manufactured or the exempted service rendered viz., trading. This should therefore, be apportioned. The adjudicating authority, therefore, erred in taking the total credit taken (including credit taken on inputs and input services used exclusively for manufacture of dutiable goods) to calculate the amount of CENVAT credit that must be reversed under Rule 6(3A). For the period April 2016 to June 2017, this was clearly, against the explicit rule position as laid down in Rule 6(3A)(b) discussed above. 28. Insofar as the period 2015- 2016 is concerned, during the relevant period, Rule 6(3A) (c) (iii) read as follows: (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance upto the place of removal or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denot....
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....31. However, there are some services used in the headquarters office of the appellant which cannot be attributed completely to either the manufacture of dutiable goods or to the provision of exempted services viz., trading. The only option in respect of such services is to divide the credit on such input services in proportion to the value of the dutiable goods and exempted services and deny credit to the extent it is attributable to the exempted services using the formula under Rule 6(3A). Therefore, the total credit taken in the formula under Rule 6(3A) can only refer to such credit as is not covered by Rule 6(2), i.e., credit on common input services. Only such an interpretation is harmonious with the restriction on credit laid down under Rule 6(1) and the provision for maintenance of separate records under Rule 6(2). We do not find anything in the CENVAT Rules which prohibits an assessee from following Rule 6(2) in respect of the inputs and input services where it is feasible to maintain separate records and follow Rule 6(3A) in case of such inputs or input services where it is not feasible to do so. It would have been a different situation if the appellant had not followed Rul....