TaxTMI 
TaxTMI 
2026 (3) TMI 842
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....E dated 16.03.1995. They are availing Cenvat credit under Cenvat Credit Rules, 2004 (hereinafter referred to as the "CCR, 2004"). The issue was that the respondent was using LPG which is common input for both dutiable goods as well as exempted goods. The department therefore issued a show cause notice to the respondent on 3rd May, 2017 proposing recovery of Cenvat Credit of Rs. 91,97,469/- @6%/7% of value of exempted goods/ exempted services under Rule 6(3) of the CCR, 2004 read with Rule 14 of the CCR, 2004 and Section 11A(4) of the Central Excise Act, 1944 along with interest under Rule 14 read with Section 11AA and penalty under Rule 15(2) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. Annexure-A to the show cause notice gives details of the amount proposed to be recovered as per Rule 6(3) of CCR, 2004. 1.2 In Adjudication proceedings, learned Adjudicating Authority in para 5.5 noted that the respondent had reversed proportionate Cenvat Credit of Rs. 1,09,181/- along with interest of Rs. 60,157/- on 07.07.2017 on LPG which is common input used for manufacture of dutiable as well as exempted goods. While setting aside the demand, he relied on the decision....
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....pective year itself (to which it pertained) and the manufacturer should have exercised the option and submitted prior intimation to the Jurisdictional Range Superintendent. In this case, no such option was excised by the appellant and therefore, accepting belated reversal of credit on proportionate basis is against the provisions of CCR, 2004 • They rely on the decision of Hon'ble Apex Court in the case of Uttam Industries reported at 2011 (265) ELT 14 (SC), wherein it has been held that in order to get benefit of any notification granting exemption, the claimant has to satisfy the eligibility criteria. Similar decisions were given in the case of Punjab State Sports Council reported at 2011 (269) ELT 540 (Tri-Mum.), Cargill India Pvt Ltd. reported at 2013 (288) ELT 209 (Guj.) and Dilip Kumar & Company reported at 2018 (361) ELT 577 (SC). • The Revenue also relied on the decision in the case of CCE Thane Vs. Nicholas Piramal (Ind) Ltd reported at 2009 (244) ELT 321 (Bom.) wherein Hon'ble Bombay High Court has held that allowing reversal of credit on inputs on proportionate basis instead of allowing reversal @ 8%/10% of the price of exempted goods is not rig....
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....bservance of said conditions". 3.1 Regarding reliance on the final order No. A/10232/2019 dated 12.02.2019 in the case of Associated Power Structure Pvt Ltd Vs. CCE and ST, Vadodara-I, Learned AR pleaded that a manufacturer is liable to reverse lump sum amount as per Rule 6(3)(i) of the CCR, 2004, in respect of exempted goods cleared by them. 4. Opposing the prayer of Revenue, Learned Counsel appearing for the respondent pleaded that the adjudicating authority as well as the Appellate authority have correctly decided the matter in their favour which does not need any interference. The respondent had reversed the credit on proportionate basis along with interest which was also accepted by the lower authorities. The department's argument that filing of intimation was a mandatory requirement under CCR, 2004, is not correct as the decision of Hon'ble Supreme Court in the referred cases is applicable for exemption notifications issued under Section 5A of the Central Excise Act, 1944. He pleads that exercising option by giving intimation to the Jurisdictional Range Superintendent regarding reversal of Cenvat credit on proportionate basis is only a procedural need which has been all....
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....d or proposed to be exercised; (iii) description of dutiable goods or [output] 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 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....
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.... 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; (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 (1) respectively, the following particulars, namely (i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), ....
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....rvices and description of such exempted goods removed and such exempted services provided; (iv) description of 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 and description of such non-exempted goods removed and non-exempted services provided; (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 final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under subclauses (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 ser....
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....vely in or in relation to the manufacture of exempted goods removed or for provision of exempted services on the basis of inputs and input services actually so used during the financial year, shall be called Annual ineligible credit and denoted as A(Annual); (ii) the 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 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 - ....
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....e provisions of clause (c) (iii) amount determined and paid as per the provisions of clause (d), if any, with the date of payment of the amount; (iv) interest payable and paid, if any, determined as per the provisions of clause (e); and (v) credit determined and taken as per the provisions of clause (f), if any, with the date of taking the credit.] [(3AA) Where a manufacturer or a provider of output service has failed to exercise the option under sub-rule (3) and follow the procedure provided under sub-rule (3A), the Central Excise Officer competent to adjudicate a case based on amount of CENVAT credit involved, may allow such manufacturer or provider of output service to follow the procedure and pay the amount referred to in clause (ii) of sub-rule (3), calculated for each of the months, mutatis-mutandis in terms of clause (c) of sub-rule (3A), with interest calculated at the rate of fifteen per cent. per annum from the due date for payment of amount for each of the month, till the date of payment thereof." 5.3 The Revenue has cited the decisions of Hon'ble Apex Court which hold that the conditions of notification should be strictly complied ....
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....igh Court against the Tribunal's order seeking decision on whether the Tribunal is justified in holding that the demand is highly dis-proportionate to the credit availed on common inputs which could be attributed to goods cleared without payment of duty. The Tribunal in this case had offered the respondent to reverse the entire credit attributable to the exempted products covered in the show cause notice. On challenge by the department, Hon'ble Gujarat High Court in the above case held that no question of law arises in the matter. Likewise, Cestat Mumbai in the case of M/s. Marcedes Benz India Ltd (cited supra) also held that demanding reversal @ 6%/7% of the value of exempted goods/exempt Trading services is not Justified and allowed party's appeal by accepting reversal of credit on exempted trading activity on proportionate basis. 5.5 After going through the above decisions, we are of the view that demanding reversal @ 6%/7% of the value of exempted goods/non-taxable services is not proper in the instant case. The assessee, though belatedly after receiving the show cause notice, had reversed credit attributable to exempted goods/non-taxable service on proportionate basis under....