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2019 (2) TMI 1361 - CESTAT HYDERABADCENVAT credit - common input services for dutiable as well as exempt goods - common input services which were used both for those flats on which they have paid service tax and those flats on which they have not paid service tax holding them as ‘not service’ but as transactions in immovable properties - non-maintenance of separate records - Rule 6 of CENVAT Credit Rules, 2004 - Held that:- Rule 6 required reversal of proportionate amount of CENVAT credit wherever the input services or inputs were used both for provision of taxable as well as exempted services. There was no provision during the relevant period for reversal of credit where common inputs or input services were used for provision of taxable services and also activities which do not amount to services at all. It is nobody’s case that the appellant has availed credit on the inputs and input services used exclusively in activities which do not amount to service. If that be so, they would not have been entitled to the credit of service tax paid or duty paid in view of Rule 2(l) and Rule 3 of CENVAT Credit Rules, 2004. There was a gap in the law during the relevant period inasmuch as one could have availed complete credit of the common inputs and input services which are used in providing taxable services and not activities which do not amount to service at all and the assessee could have used only a small fraction of common inputs/ input services in providing taxable services and rest in activities which do not amount to service at all and still would have been entitled to full credit of the tax paid. This was rectified by insertion of explanation (3) to Rule 6(1) with effect from 01.4.2016 vide notification 13/2016-CE (NT) dated 01.3.2016. During the relevant period Rule 6(1) did not provide for reversal of CENVAT credit in respect of input services used both in provision of taxable services and for activities which do not amount to service. Appeal allowed - decided in favor of appellant.
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