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2019 (11) TMI 952 - AT - Service TaxProportionate reversal of CENVAT Credit - inputs used in manufacture of exempted products as well as taxable goods - reversal of inputs as such - Rule 6(3) of CCR 2004 - whether the appellant is required to pay amount under Rule 6(3) in respect of exempted service viz: ‘trading’ undertaken by them or they could reverse an amount under Rule 3(5) when the inputs are removed as such? - levy of interest and penalties. HELD THAT:- It is found from the rules that both options are open. Rule 3(5) does not make a distinction based on the purpose for which the inputs are removed as such; whether the inputs are removed as such for sale or otherwise makes no difference to the applicability of Rule 3(5) of CCR 2004. It is true that ‘trading’ is an exempted service and Rule 6(3) covers exempted services. However, having reversed an amount under Rule 3(5) of CCR 2004, the appellant will not be covered by Rule 6(3) because the credit attributable to the inputs removed as such, has already been reversed - the demand on this account needs to be set aside. Demand under Rule 6(3) of CCR 2004 - the inputs which were used for manufacture of the exempted products - Whether the appellant is liable to pay an amount under Rule 6(3)(1) when they have reversed proportionate amount of CENVAT Credit on the inputs used in manufacture of exempted products? - HELD THAT:- Rule 6(2) provides the assessee an option to maintain separate accounts for receipt consumption, inventory of inputs used in relation to manufacture of exempted goods and dutiable goods and take CENVAT Credit only on inputs used in manufacture of dutiable goods. In the case of ASTRIX LABORATORIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS & SERVICE TAX, HYDERABAD-I [2019 (5) TMI 1344 - CESTAT HYDERABAD] and MATRIX LABORATORIES LTD VERSUS CCCE & ST, HYDERABAD - I [2018 (8) TMI 1440 - CESTAT HYDERABAD], the appellant had taken CENVAT Credit only on the inputs which have gone into manufacture of dutiable goods. A plain reading of Rule 6(2) does not require separate stocks of inputs to be maintained. It also does not require that the inputs should be bought under different invoices. What is required is maintenance of separate accounts. The appellant in this case has, by reversing the proportionate amount of credit as per the standard formula, has, in effect, maintained such accounts. The matter remanded to the original authority for the limited purpose of verification of the amounts reversed - appeal allowed by way of remand.
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