TaxTMI 
TaxTMI 
2024 (4) TMI 1346
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.... either maintain separate books of account for receipt, consumption & inventory of input and input services meant for use in providing output service and the quantity of input and input services meant for use of exempted service. It is alleged that the Appellant has contravened the provision of Rule 6(3) of the Cenvat Credit Rules, 2004 [CCR 2004] with an intent to evade payment of amount attributable to input services used in or in relation to provision of exempted service provided. A Show cause notice dated 31.03.2016 was issued alleging that the Appellant has failed to pay the amount attributable to input service used in relation to trading activity amounting to Rs.2,80,532/- as computed in the table below:- Year Total Value of Exempted Service provided during Financial Year (M) Total Value of output and Exempted Service provided during Financial Year (N) Total Cenvat Credit taken during Financial Year (P) 2012-13 73,94,38,586/- 79,50,27,221/- 1,01,992/- 2013-14 110,68,54,745/- 118,94,85,443/- 44,885/- 2014-15 121,59,44,640/- ....
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....(2) provides that if inputs or input services are used for provision of output services which are chargeable to duty or tax as well as exempted services, then separate accounts are to be maintained for receipt, consumption and inventory of inputs and receipt and use of input services and the provider shall take credit only on inputs used for dutiable output services. Rule 6(3) of the Cenvat Credit Rules, 2004 is relevant for the purpose of this case and states to the effect that a provider of output services who opts not to maintain separate accounts, as required under Rule 6(2), should follow any one of the options provided under Clauses (i) to (iii) thereunder, as applicable to him. Clause (i) provides for the option of paying an amount equal to 5% of the value of the exempted services. Pursuant to Notification No. 18/2012, dated 17-3- 2012, the amount to be paid under Clause (i) was increased to 6% with effect from 1-4-2012. 8. It is an admitted fact that the petitioner did not maintain separate accounts of the inputs/input services utilized for providing certain taxable and exempted output services. It also did not choose to opt for one of the procedures stipulated in ....
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....ions while holding against the petitioner on this aspect also. 11. In fact, no case law whatsoever finds mention in the impugned Order-in-Original. This reflects the level of application of mind by the second respondent. It is not open to an authority to ignore the binding precedents cited before it while interpreting and applying legal provisions. All the more so, when such misguided application of law by it leads to preposterous results, as in the case on hand. The petitioner who availed total Cenvat Credit of Rs. 1,41,51,903/-, of which only a small sum of Rs. 17,15,489/- falls within the realm of dispute, is now sought to be mulcted with exorbitant demands by the second respondent. Be it noted that the second respondent ultimately called upon the petitioner to pay Rs. 3,52,65,241/- towards the Cenvat Credit irregularly availed by it, along with interest, apart from a penalty of Rs. 3,52,65,241/-. The second respondent also confirmed the demand for a sum of Rs. 12,75,645/- being the Cenvat Credit irregularly availed on the strength of debit notes along with a penalty for a like sum. A further penalty of Rs. 10,000/- was also imposed for contravention of the provisions o....
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....rovision does not contemplate that the Service Tax authorities can choose one of the options on behalf of the service provider. As rightly pointed out by Sri S. Ravi, Learned Senior Counsel, if the petitioner did not abide by the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, it was open to the authorities to reject its claim as regards the disputed Cenvat Credit of Rs. 17,15,489/-. 15. We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly, Rule 14 of the Cenvat Credit Rules, 2004 empowered the authorities to recover such credit which had been taken or utilised wrongly along with interest. However, the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. The Order-in-Original, to the extent that it proceeded on these lines, therefore cannot be countenanced. 16. As regards the issue of debit notes, Sri A. Radha Krishna, Learne....
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....vities have always been treated as 'exempted service' for the purpose of the Credit Rules. Thus, the appellant which was providing both taxable and exempted services was utilizing the input services in respect of both taxable and exempted service and, therefore, had contravened the provisions of rule 6 of the Credit Rules in as much as for the period from April 2006 to March 2008, the appellant utilized CENVAT credit in excess of 20 percent of service tax payable on taxable output services from the CENVAT credit account and for the period from April 2008 to March 2011, the appellant failed to follow the procedure prescribed under rule 6(ii) and rule 6(iii) ofthe Credit Rules. 16. The contention of the appellant is that 'trading' was not an exempted service prior to 01.04.2011 since the Explanation to rule 2(e) of the Credit Rules, as amended on 01.04.2011, is not retrospective in nature. 17. Rule 2 of the Credit Rules deals with definitions and rule 2(e) deals with the definition of 'exempted service'. The definition of 'exempted service' has undergone amendments from time to time and the definition as it stood from 2006 to 01.04.2011 and from 01.04.2011 onwards i....
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....mendment in the statutory provisions is to be construed as retrospective in effect or prospective, in order to be given effect to. In this context, the law is amply clear that if a substantive law is introduced, the date of effect of the instrument through which the decision of legislation was conveyed should be considered as the relevant date, when the same was issued or published in the official gazette for the knowledge of the general public. In this contest, the Hon'ble Supreme Court in the case of Martin Lottery Agencies Ltd. (supra) have ruled that by reason of an explanation, a substantive law may also be introduced and if a substantive law is introduced, it will have no retrospective effect. We find that the Hon'ble Madras High Court in the case of Ruchika Global Interlinks (supra) have held that inclusion in Explanation to Rule 2(e) "trading" was only clarificatory. It is further observed that the arguing counsels before the Hon'ble Madras High Court did not refer to or relied upon the judgment of Hon'ble Supreme Court in the case of Martin Lottery Agencies Ltd. (supra). Since, the law is well settled by the Hon'ble Apex Court in context with retrospective or prospecti....