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2026 (4) TMI 1827
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....it is found that the assessee has provided both taxable services and exempt services while availing Cenvat Credit on common input services during 2010-11 and 2011-12. It was alleged that as per Rule 6(3) of the Cenvat Credit Rules, 2004 the assessee who does not maintain separate Cenvat account for input services used for both taxable and exempt output services, is liable to pay 5%/6% of value of exempted output service. The appellant explained the procedure followed by them wherein they were taking the credit on Capital goods [50% each in two financial years] and were taking only proportionate cenvat credit for the input services and inputs. However, not being satisfied with the explanation, a Show Cause Notice came to be issued on 16.10.2015, demanding the Service Tax for the period 2010-11 to 2011-12 [Till September 2011], by invoking the extended period provisions. The demand was made @ 5% / 6% of the total exempted turnover on the ground that the appellant failed to maintain separate accounts. The appellant contested the demand on merits by submitting the documentary evidence about the cenvat credit availment on proportionate basis. They also contested the demand on the ground....
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....onsideration the relevant provisions as were obtaining during the material period and proceeded on erroneous assumption that non maintenance of account straightaway makes a person liable to payment of 5% /6% of exempted healthcare/output services. 6. The Ld Counsel relies on the following case laws on the very same issue: Mercedes Benz India (P) Limited vs. CCE [MANU/CM/0203/2025 CESTAT-Bombay] Aster Pvt. Ltd. vs. CCE [2016 (43) S.T.R. 411 (Tri. - Hyd.)] Comm. of CGST & CE, Bolpur vs. Jai Balaji Industries (Unit-III) (2025) 26 Centax 371 (Tri. Cal.) In view of the above submissions, the Ld Counsel prays that the appeal may be allowed on merits. 7. He further made submissions on the issue of time bar. It is submitted that the. Adjudicating Authority has not disputed that the law bringing tax on hospitals was a new levy, and has also not disputed the fact that the Appellant herein was not fully conversant with the procedures which was required to follow. However, insofar as the substance is concerned, it remains undisputed that the Appellant, to the best of its understanding, availed full credit of capital goods on the basis of law contained in Rul....
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.... sight of Rule 6(4) of the CCR 2004, which reads as under: "Rule 6 (4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year." 13. We wonder as to how such a clear-cut legal / statutory provision has been completely overlooked to take the view that the appellant has used the capital goods for providing both taxable and exempted services. Unfortunately, the Adjudicating authority holding a senior designation as Commissioner has also completely ignored this statutory provision. In the cited case law of IDEA Cellular Ltd. vs. CCE [2009 (16) S.T.R. 712 (Tri. - Del.)], the Tribunal has held : "(a) In terms of the provisions of Sub-rule (4) of Rule 6 of the Cenvat Credit Rules 2004, capital goods Cenvat credit is not permissible only when the capital goods are exclusively used for manufacture of 'exempted goods' or for providing 'exempted ser....
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....egorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3) (i) under Rule 6 should be followed by the assessee. 21. As discussed above and in the facts of the case that actual Cenvat credit attributed to the exempted services used towards sale of the bought out cars in terms of Rule 6(3A) comes to Rs. 4,06,785/- whereas adjudicating authority demanded an amount of Rs. 24,71,93,529/-. In our view, any amount, over and above Rs. 4,06,785/- is not the part of the Cenvat Credit, which required to be reversed. The legislator has not enacted any provision by which Cenvat credit, which is other than the credit attributed to input services used in exempted goods or services; can be recovered from the assesse". 16. In the case of Cranes & Structural Engineers vs. CCE, [2017 (347) E.L.T. 112 (Tri. - Bang.)], the Tribunal has held as under: "4. I have heard both the parties and perused the records, Rule 6 of CCR, 2004 speaks about the obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Clause (i) of Rule 6(3) states that Cenvat credit shall not be allow....
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....3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in the judgments cited supra. It has been held in the judgment cited supra that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified, Therefore, keeping in view the facts and evidence on record, the demand raised by the Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro rata credit with interest on 31- 7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the....
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....opinion that this petition deserves to be allowed. The facts of the case show that the Modvat credit taken on the inputs was reversed by the petitioner. Since the reversal of Modvat credit has been done by the petitioner hence in our opinion it has to be treated that no credit was taken by the petitioner on the inputs, namely PVC granules used in the manufacture of PVC/PP bottles as contemplated under the Notification No. 15/94-C.E., dated 1 3-1994. 14. The undisputed facts of the case are that the petitioners have reversed Modvat credit on the entire inputs amounting to Rs. 10,61,379/-. 15. In fact the show cause notice issued to the petitioner specifically records that the petitioner has reversed the credit on PVC granules, which are used in the manufacture of PP Bottles. 22. Hence in our opinion the Tribunal was not justified in taking a view that reversal of the credit having been made by the petitioner after removal of the final products the petitioner was not entitled to the benefit of Notification No. 15/94-C.E., dated 1-3-1994. 23. This view of the Tribunal is in our opinion patently erroneous and contrary to the decision of the five Memb....
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....Tribunal and Kolkata Tribunal. Therefore, applying the ratio of these case laws, we hold that the confirmed demand of Rs. Rs.1,00,76,186/-, is legally not sustainable. Accordingly, we set aside the demand and allow the appeal to this extent". 18. We find that to the facts of the present, the decisions cited supra, are squarely applicable. Therefore, we set aside the impugned order and allow the appeal on merits. 19. Now we take up the issue of time bar raised by the appellant. Admittedly, it is on record that the appellant is registered with the Revenue Dept. and has been filing their ST 3 Returns. It is also on record that they have been availing the Cenvat Credit on Capital goods [which is fully available], inputs and input services and were reversing the proportionate credit in respect of inputs and input services. Therefore, no material has been brought in by Revenue to show any suppression on the part of the appellant. The period in question is FY 2010-11 and FY 2011-12 [Upto Sept 2011]. There is no dispute towards the ST 3 Return filed by the appellant. The CBEC Manual mandates the Range authorities to take up the scrutiny work even under the Selfassessment regime. Stil....