TaxTMI 
TaxTMI 
2024 (10) TMI 1463
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....mand confirmed by the Additional Commissioner of Central Excise vide Order-in- Original No.55/2016 and Order-in-Original No.56/2016 in respect of the demand proposed in the following Show Cause Notices:- Sl.No. Show Cause Notice No. Date Period Amount (Rs.) 1. 19/2015 01.05.2015 April 2013 to March 2014 12,07,125 2. 36/2015 19.08.2015 April 2014 to March 2015 28,15,648 Total : 40,22,773 4. At the time of admission, this Court has framed the following substantial questions of law, to be answered are as follows:- 1. Whether the 2nd respondent is correct in holding that 'total Cenvat credit taken' into consideration instead of 'common Cenvat credit taken' for the purpose of reversal of credit under Rule 6(3A) (c) (iii) of the Cenvat Credit Rules, 2004? 2. Whether the 2nd respondent is correct in holding that the term 'total Cenvat Credit taken' used in the provision of Rule 6(3A)(c)(iii) of Cenvat Credit Rules, 2004 is unambiguous? 3. Whether the 2nd respondent is correct in placing reliance on the Stay Order of the Hon'ble Tribunal in the case of ....
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....ar, and (ii) "N" denoted total value of "taxable" and "exempted services" provided, and total value of "dutiable" and "exempted goods" manufactured and removed during, the financial year, and (iii) "P" denoted total CENVAT credit taken on "input services" during the financial year. 13. The case of the appellant was that the CENVAT credit taken on input service during the financial year for the purpose of "P" in the above Formula is to be confined to "common input services" availed which were both used in relation to "dutiable final products" and "exempted services" namely "trading activity" and not the total of CENVAT credit availed on "input services" as it would lead to distortion. 14. At the outset, it was submitted by the learned counsel for the appellant that the issue is no longer res integra and is covered by the following three decisions of the CESTAT, Chennai and the order of the CESTAT, New Delhi in the Appellant's own case. Sl.No. Excise Appeal No. Final Order No. Date 1. 41303/2019 40540/2020 24.02.2020 2. 41120/2016 40717/2021 11.01.2021 3. 54157/2018 51046/2021 22.02.2021 15. Apart from the....
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....nd, it was the case of the Department that while adopting the said formula for calculating the amount payable under the Rule 6(3A)(c)(iii) of CENVAT Credit Rules, 2004 in respect of P, instead of adopting total CENVAT credit availed on "common input services" during the financial year as prescribed under the said Rule, the appellant had confined CENVAT credit taken only on "common input services" during the financial year. 22. This had resulted in short payment of amount payable under the Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004 and thus, the demand was confirmed vide Order-in-Original Nos.55/2016 and 56/2016, which decision was affirmed by the Appellate Commissioner vide Order-in-Appeal No.91/2017 (CXA-I) dated 28.03.2017 and by the Appellate Tribunal vide Impugned Order dated 08.11.2017. 23. We have heard the learned counsel for the appellant and the learned Senior Standing Counsel for the first respondent. 24. The dispute had arisen on account of the alleged failure of the appellant to maintain separate account as is contemplated under Rule 6(2) of the CENVAT Credit Rules, 2004 and the appellant opting to pay amount under Rule 6(3A)(c)(iii) of the CENVAT Cred....
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....sion of exempted services; iv. for the provision of output services excluding exempted services. (b) the receipt and use of input services i. in or in relation to the manufacture of exempted goods and their clearance upto the place of removal; ii. in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; iii. for the provision of exempted services; and iv. for the provision of output services excluding exempted services. 30. As per Explanation 1 to the CENVAT Credit Rules, 2004, as it stood, if the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, such manufacture shall exercise such option for all exempted goods manufactured by it or, as the case may be, all exempted services provided by it, and such option shall not be withdrawn during the remaining part of the financial year. Explanation 1 to Rule 6(2) of the CENVAT Credit Rules, 2004 as it stood, reads as under:- Explanation I - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for ....
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....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 in 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 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 months 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....
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.....e., 30th Jun till the date of payment, where the amount short-paid is not paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:- i. details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the whole financial year, determined provisionally as per condition (b), ii. CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), iii. amount short paid determined as per condition (d), along with the date of payment of the amount short-paid, iv. interest payable and paid, if any, on the amount short-paid, determined as....
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....dit Rules, 2002 and CENVAT Credit Rules, 2004. Several clarificatory circulars have also been issued. Taking note of all these, the Central Government amended the provisions and finally substituted the provisions vide Notification No.13/2016- CE (NT) dated 01.03.2016. The correction made in the above notification by substituting Rule 6(3A)(c)(iii) formula has to be held clarificatory in nature and therefore retrospective. 35. Under the new dispensation pursuant to amendment to Rule 6 of the Cenvat Credit Rules, 2004 vide notification No.13/2016-CE (NT) dated 01.03.2016, the "ineligible credit" was to be determined both provisionally and finally. 36. For easy comparison and reference Rule 6 of the Cenvat Credit Rules, 2004 both before and after amendment are reproduced below:- Pre-2016 Pre-2016 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 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 manufacture of exempted goods and their clearance upto the p....
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....determined under subrule (3A) in respect of input services. The provisions of subclauses (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 that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be six percent of the value exempted. Provided also that in case of transportation of goods of passengers by rail the amount required to be paid under clause (i) shall be an amount equal to 2 percent of value of the exempted services. Explanation I - If the manufacturer of goods or the provider of output service, avails any of the option under this subrule, 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....
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....ce 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 service during the month. (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely:- i. the amount of CENVAT credit attributable to inputs used in or relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or relation to manufacture of said exempted goods, denotes as H; ii. the amount of CENVAT credit attributable to inputs used for provision of exempted services = J/K multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value ....
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.... determined as per condition (c), iii. amount short paid determined as per condition (d), along with the date of payment of the amount short-paid, iv. interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and v. credit taken on account of excess payment, if any, determined as per condition (f); (h) where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribe in condition (b), due to reasons that no dutiable goods were manufactured and no output service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i) where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service sha....
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....er of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (3), (3A) and (3B), it shall be recovered, in the manner as provided in Rule 14, for recovery of CENVAT credit wrongly taken. Explanation IV - In case of a manufacturer who avails the exemption under a notification based on the value of clearances in a financial year and a service provider who is an individual or proprietary firm or partnerhsip firm, the expressions, "following month" and "month of March" occurring in sub-rules (3) and (3A) shall be read respectively as "following quarter" and "quarter ending with the month of March" 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 used in or in relation to the manufacture of exempted goods or for provision of exempted services, ....
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.... shall follow any one of the following options applicable to him, namely :- [(i) pay an amount equal to six per cent. of value of the exempted goods and seven per cent of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period; or] (ii) pay an amount as determined under sub-rule (3A) : 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 that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be seven per cent. of the value so exempted : Provided also that in case of transportation of goods or passengers by rail, the amount required to be paid under clause (i) shall be an amount equal to two per cent. of value of the exempted services. Exp....
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....lly pay every month, the amounts determined under sub- clauses (i) and (iv), namely :- (i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid; (ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non- exempted services shall be called eligible credit, denoted as B, and shall not be required to be paid; (iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as,- C = T - (A + B); Explanation. - Where the entire credit has been attributed under sub-clauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution. iv. the amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted ....
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....vely in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services on the basis of inputs and input services actually so used shall be called Annual eligible credit and denoted as B(Annual); (iii) common credit left for further attribution shall be denoted as C(Annual) and calculated as, - C(Annual) = T(Annual) - [A(Annual) + B(Annual)]; (iv) common credit attributable towards exempted goods removed or for provision of exempted services shall be called Annual ineligible common credit, denoted by D(Annual) and shall be calculated as, - D(Annual) = (H/I) x C(Annual); where H is sum total of- (a) value of exempted services provided; and (b) value of exempted goods removed; during the financial year; where I is sum total of - (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; vi. during the financial year; 37. This has been explained in Circular No.334/8/2016-TRU dated 29.02.2016 from D.O.F.No.334/8/....
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....he total credit taken or (b) pay an amount as determined under sub-rule (3A). iv. The maximum limit prescribed in the first option would ensure that the amount to be paid does not exceed the total credit taken. The purpose of the rule is to deny credit of such part of the total credit taken, as is attributable to the exempted goods or exempted services and under no circumstances this part can be greater than the whole credit. v. Sub-rule (3A) is being amended to provide the procedure and conditions for calculation of credit allowed and credit not allowed and directs that such credit not allowed shall be paid, provisionally for each month. The four key steps for calculating the credit required to be paid are :- (a) No credit of inputs or input services used exclusively in manufacture of exempted goods or for provision of exempted services shall be available; (b) Full credit of input or input services used exclusively in final products excluding exempted goods or output services excluding exempted services shall be available; (c) Credit left thereafter is common credit and shall be attributed towards exempted goods and exempted services by....
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....ot be required to be reversed by the shipping lines. It may be mentioned here that this service presently qualifies as an "exempted service" on account of Rule 10 of Place of Provision of Supply Rules. Service by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India is being excluded from the definition of 'exempted service' by amending rule 2(e) of the rules as discussed above. Amendment in sub-rule (7) coupled with the corresponding amendment in the definition of Exempted Service is aimed at allowing credit of eligible inputs, input services and capital goods for providing the said service and providing Indian shipping lines a level playing field vis a vis the foreign shipping lines. The credit available may be used by Indian shipping lines to pay service tax on the services of transportation of goods by a vessel from outside India to the customs station of clearance in India, which would become taxable w.e.f 1st June, 2016 after enactment of Finance Bill 2016. (j) ..... (k) ..... (l) ..... (m) ..... (n) ..... (o) ..... The existing sub-rule (2) of rule 14 presc....
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....roviding such taxable service, shall be taken; but shall not include a service- (a) which is exported in terms of Rule 6A of the Service Tax Rules, 1994; or (b) by way of transportation of goods by a vessel from customs station of clearance in India to a place outside India. 4 (h) "final products" means excisable goods manufactured or produced from input, or using input service; 4 (h) "final products" means excisable goods manufactured or produced from input, or using input service; 40. Thus, the trading activities carried out by the appellant were "exempted service" within the meaning of the provisions of the CENVAT Credit Rules, 2004. The trading activities carried out by the appellant were "exempted service" both before and after amendment to the Rules. 41. As far as the present dispute is concerned, Rule 2(e) of the CENVAT Credit Rules, 2004 is relevant as it stood prior to 2016. It has not undergone any change for the purpose of this inquiry. Similarly, Rule 6 of the CENVAT Credit Rules, 2004 also underwent few changes. 42. During the period in dispute between April 2013 to March 2015, the Rule 6 of the CENVAT Credit Rules, 2004 read slightly different ....