TaxTMI 
TaxTMI 
2024 (10) TMI 890
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....s also engaged in trading of goods, which is an exempted service and thus, no Cenvat credit was availed by the Appellant on the input services, which were exclusively used for trading activity. However, certain input services, on which Cenvat credit was availed, namely, Warehouse Support Services, Goods Transport Agency (inward freight), Renting of Warehouse, Legal & Consultancy Services etc., were used by the Appellant in both manufacture of dutiable goods and provision of exempted services i.e. trading. Such common Cenvat credit was availed by the Appellant, following the procedure of proportionate reversal of Cenvat Credit amount attributable to exempted service under Rule 6(3A) of the CENVAT Credit Rules, 2004 [C.C.R.2004] as per the formula prescribed therein, under due intimation letter filed at the beginning of each Financial Year, to the Excise Range Office. 4. An Audit of the Appellant's records was conducted by the Department for the period April 2015 to March 2016. The audit team raised an objection that the Appellant had short reversed an amount of Rs. 13,63,385/- towards Cenvat credit under Rule 6(3)(b) of the C.C.R.2004 as the Appellant took into consideration only t....
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....with Rule 15 of the Cenvat Credit Rules. Thus, service tax amounting to Rs. 13,63,385/- (Rupees thirteen lakh sixty three thousand three hundred eighty five only) appears to be recoverable from the party under the provisions of Section 73(1) of the Finance Act, 1994 read with Rule 14 of the Cenvat Credit Rules." 6. The reply to the SCN was duly filed on 08.05.2018 by the Appellant, elaborating the rationale behind using common Cenvat Credit and also stated the Circular No. 754/70/2003-CX dated 09.10.2003 and Circular No. 868/6/2008 -CX dated 09.05.2008 in support. It clarified that input services exclusively relating to manufacture of dutiable goods is eligible for Cenvat credit under Rule 3 of the CCR. Rule 6 only imposes an obligation not to avail Cenvat credit on input services relating to provision of exempted services and manufacture of exempted goods. 7. After considering the defence reply filed by the Appellant, the Ld. Assistant Commissioner, vide the Order-in-Original No. No. 02/AC/DIV-I/GBN/2019-20 dated 15.4.2019, upheld all the allegations contained in the SCN and confirmed the demand raised in the SCN, alongwith interest and also imposed penalty. 8. On appeal file....
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....ied 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. (b) Commissioner v. Reliance Industries Ltd. - 2019 (28) G.S.T.L. 96 (Tribunal) "8. From the reading of Rule 6(1), it is clear that only in respect of input or input service used in exempted goods are not allowed. That means input or input service used in taxable service/dutiable goods, Cenvat credit is allowed. Sub-rule (2) of Rule 6 is only as an option that if any input or input services used in exempted goods, credit should not be allowed and only with this intention some mechanisms for expunging Cenvat credit attrib....
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.... Department is incorrect and is violative of the principles of Rule 6(1) of the C.C.R.2004. Once the identified input services have been exclusively used in manufacture of dutiable goods, then there is no requirement to reverse any portion of such credit by applying the formula of apportionment. 15. In order to bring parity with the underlying objective of Rule 6, Rule 6(3A) of the Credit Rules was amended vide Notification No. 13/2016-CE (NT) dated 01.03.2016, effective from 01.04.2016, by substituting Rule 6(3A) (b)(ii) of the Credit Rules, to consider only common input services and not total input service credit, for the purpose of computing the amount of reversal. 16. It is observed that such amendment in Rule 6(3A) by virtue of substitution was clarified by the Board vide TRU Circular No. 334/8/2016-TRU dated 29.02.2016, to apply retrospectively. The clarification clearly mentioned that the provisions of Rule 6 providing for reversal of Credit in respect of input services used w.r.t. exempted goods/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 cl....