AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1544
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....are that the Appellant is providing services in various fields of Information Technology, wherein, some are taxable services and some are exempt. They are also engaged in 'Trading of software and hardware'. This activity of Trading is defined as 'exempted service' in Rule 2(e) of the CENVAT Credit Rules, 2004 (CCR for short) with effect from 01.04.2011. It is seen from the records that the Appellant has divided its activity into different 'Strategic Business Units (SBUs) based on the nature of services rendered by each unit. In some of the SBUs, input services used by them pertained to both taxable and exempted services for which they stated that they were maintaining separate accounts for the same. However, they exercised the option to avail Rule 6(3)(ii) of the CCR on 14,10.2010. They neither exercised option for 2011-12 nor withdrawn the option filed on 14.10.2010. Further vide their letter dated 28.06.2012, they quantified the actual reversal to be made for 2011-12 under Rule 6(3A) ibid and informed that they had reversed an amount of Rs.5,40,844/- provisionally during 2011-12 based on the calculation made on the basis of audited Financial Year of 2010-11. It was claimed that t....
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....OL-60 CESTAT Mad. iii. The amount to be paid / reversed by the appellant under Rule 6 (3A) shall be determined only with reference to the CENVAT credit availed by them on various input services consumed in SBUs 32, 33, 34 & 35, i.e. common input services. The amount to be reversed has been worked out by the appellant which has been reversed. iv. The appellant has considered the value of export of services, twice in the calculations, as observed in the show cause notice. After rectifying the same, the revised amount to be reversed would be Rs.4,99,402 as against an amount of Rs.5,40,847 reversed by the Appellant. v. Further, the appellant wish to submit that if at all, apart from the credit availed on common SBUs, the common input services availed in those SBUs where trading is undertaken alone can be considered for reversal and if considered, the amount to be reversed works out to Rs.5,37,100 as contained in the reply to the show cause notice. vi. The trading turnover has been considered at Rs.47,33,01,804 both in the appellant's workings and the Department's workings. Out of the above, trading of developed software accounted for Rs.25,86....
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....cising 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:- 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 taxable 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 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 val....
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....ial year, and P denotes total CENVAT credit taken on input services during the financial year; d. the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; e. the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date, i.e., 30th June 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;....... 8. Upon hearing both sides, we find that the issues to be decided are: - i. Whether the Secure Socket Layer Certifica....
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.... also exempt services (trading and other exempted services). c) The appellant had reversed proportionate credit, by considering the common input services credit of Rs.2,04,03,305 availed in the SBUs of Finance, HR, Admin & Corporate, which are common to other SBUs. The credit of input services consumed exclusively in those SBU's, which provide only exempted services has not been availed. Input services consumed in other SBUs, such as HR, Finance, etc. represent the common credit, which has been subjected to proportionate reversal by the appellant. 9.3.2 It was further submitted that in the Appellant's own case, for the previous period, the issue has been decided in their favour, as reported in 2016-TIOL-911-CESTAT-Mad. The appellant has relied upon the following decisions, wherein it has been held that the amendments made in rule 6 (3A) of the CCR, 2004 with effect from 01.04.2016, to the specific effect that such proportionate reversal is applicable only for the common input services is only clarificatory in nature and it is only the common credit that should be subjected to proportionate reversal. (i) CCE Vs Reliance Industries Ltd. 2019 (28) GSTL 96 Tri-Ahmd....
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....e to exempted goods/exempted services in the manner prescribed. Thus, the formula prescribed is for arriving at the amount that is availed in respect of exempted goods and services, which has to be reversed by the assessee. The formula is not for determining the eligible credit on inputs and input services used for dutiable goods or taxable services. While appreciating this answer, we can understand that "P" denotes the total common CENVAT credit and not the total credit availed by the assessee during the financial year. This issue has been analysed by the Tribunal in the case of CCE &ST, Rajkot v. M/s. Reliance Industries Ltd., [2019 (3) TMI 784 CESTAT AHMEDABAD]. "We have carefully considered the submissions made by both the sides and perused the record. The limited issue is to be decided in this case is that for the purpose of calculating the Cenvat credit for reversal in terms of Rule 6(3A) as per the formula given therein, whether the total Cenvat credit means it is including the Cenvat credit of input services exclusively used for dutiable product should be taken or total Cenvat credit of only common input service should be taken. From the reading of Rule 6(....
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....clude CENVAT credit on input/input services exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, it would result in an anomaly that the CENVAT credit which is availed for manufacture of dutiable goods also will get disallowed. Relevant paragraphs 8 and 10 of the said order are noticed as under: "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 attributed only to the exempted goods are provided. As per clause (b)(ii) & (iv), it is clearly provided that entire credit in respect of receipt and use of inputs/input service is allowed when such input and input service is used in dutiable final products and taxable service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. The ....
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....n dispute in Rule 6 (3A)(c)(ii) of the CENVAT Credit Rules, 2004 was cured to ensure both manufacturers/service providers do not pay reverse/pay the amount under Rule 6 (3A)(c)(ii) of the CENVAT Credit Rules, 2004 in excess." From the above case Laws discussed above, and also by the amendment of the Rule 6(3A) of CCR 2004 wef 1.4.2016 retrospectively as per clarification issued in TRU Circular 334/8/2016-TRU dated 29.02.2016, we conclude that the common credit is only to be considered for reversal of credit under Rule 6(3A) and not Total credit availed by the Appellant. Thus, the main issue is answered squarely in favor of the Appellant and against the Revenue. 9.5 PENALTY - As regards imposition of penalty, we observe that the Appellant quantified and reversed the Common credit of Rs.5,40,847 for the year 2011-12 provisionally and informed the Department vide their letter dated 28.06.2012 based on the Audited financial year 2010-11 and that there is an excess reversal of Rs.1,76,402. This letter only has resulted in issue of SCN No. LTUC/419/2012-ADC dated 14.12.2012 proposing to recover an amount of Rs.24,08,193/- allegedly short paid for the period from April 2011 to Ma....