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2021 (11) TMI 425 - AT - Central ExciseCENVAT Credit - common input services for taxable as well as exempt goods - non-maintenance of separate records - allegation is that assessee has not opted for claiming credit on proportionate basis by filing the required declaration - non-observance of the procedure as prescribed in Rule 6 of the Credit Rules - HELD THAT:- The issue has been settled by the Hon’ble Telangana High Court in favour of the assessee in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] wherein it has been held that in case the assessee has not chosen to maintain separate accounts, the Credit Rules do not authorize the departmental authorities to choose one of the options on behalf of the assessee so as to demand the amount of 5% or 10% as per Rule 6(3) of the Credit Rules. The demand of the duty amount calculated @ 5% or 10% of the exempted value cannot be made even though the assessee has not followed the prescribed procedures - there is no legal provision under which an amount equal to 5% or 10% of the value of the exempted goods can be recovered. The reason is that payment of an amount of 5% or 10% is one of the choices under Rule 6 and is not a mandatory payment. This choice cannot be foisted upon the appellant nor can such an amount be recovered under Rule 14. The Show Cause Notice demanding an amount equal to 5% or 10% of the value of the exempted products under Rule 14 is not supported by law. It is not possible to sustain the impugned demand based on such Show Cause Notice and therefore, the appeal filed by the assessee deserves to be allowed. Penalty imposed in the impugned order also needs to be set aside - Appeal allowed - decided in favor of assessee.
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