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2023 (3) TMI 12 - AT - Service TaxCENVAT Credit - input services used for taxable as well as exempt service - time period within which the assessee must inform the department about exercising the option under Rule 6(3) of CCR - non-intimation of option under Rule 6(3) is at best a procedural lapse for which substantial benefit ought be denied? - whether retrospective effect can be given to the option filed by the taxpayer on 14.10.2010 under Rule 6(3)(ii) of CENVAT Credit Rules, 2004? Taxpayer has claimed that they are maintaining separate set of accounts for exempted and taxable services as per the option under Rule 6(2) of CENVAT Credit Rules, 2004, and are taking credit of only those input services used in taxable services for discharge of duty related to taxable services, they cannot simultaneously avail the option under Rule 6(3) for credit of common input services used for both exempted and taxable service. HELD THAT:- The sequence of Rule 6 and the procedure and conditions stated therein, clearly bring out that the assessee can only avail the facility under Rule 6 after following the provisions of the said Rule which should be as on the date of exercising the option. Hence a harmonious reading of Rule 6(3)(ii) and Rule 6(3A) of CCR, 2004 leads to the conclusion that the intimation given to the department is effective only prospectively. It must be stated that, Rules made under the Statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be, judicially noticed for all purposes of construction or obligation. The service provider has to calculate and pay, provisionally, for every month, the amount attributable to exempted services, as per the formula given under Rule 6(3A)(b) of CCR, 2004. This is not an empty formality to term the provision as procedural. Credit taken into their books by assessee’s are as good as liquid cash for the purpose of payment of duty and requires a system of checks and balances to ensure their proper and lawful utilization as per the scheme of the Act and Rules. Allowing every assessee the freedom to make the declaration whenever he chooses, even retrospectively after the statutory monthly returns are filed and then reversing credit at will to claim compliance with the Rules will lead to lack of finality in assessments, encourage attempts to evade duty and create administrative difficulties in effectively monitoring and implementing the CENVAT scheme. In the circumstances it is difficult to hold that non-compliance with the procedures and conditions of Rule 6 as non-mandatory. The Hon'ble Supreme Court while examining a similar issue, in its judgement in the case of EAGLE FLASK INDUSTRIES LIMITED VERSUS COMMISSIONER OF C. EX., PUNE [2004 (9) TMI 102 - SUPREME COURT], relating to the making of a declaration and giving an undertaking by the assessee to avail the benefit of exemption given by a notification, held that it cannot be said that these are procedural requirements, with no consequences attached for non-observance. Whether the option under Rule 6(2) and Rule 6(3) can be availed simultaneously? - HELD THAT:- The matter has already been examined by this Bench in M/S. SIFY TECHNOLOGIES LTD. VERSUS COMMISSIONER OF SERVICE TAX, LTU, CHENNAI [2018 (9) TMI 317 - CESTAT CHENNAI] where it was held that an assessee cannot avail of the options under Rule 6(2) and 6(3) simultaneously. The obligations under Rule 6 are in the form of various alternatives and the assessee is free to choose any option. The assessee is under no compulsion to choose one option over the other. But once having chosen a particular option he cannot avail of the other option simultaneously. Hence this question is also answered in favour of the decision of the Lower Authority in the impugned order. Whether interest or penalty are liable to be demanded from the assessee, as proportional reversal of credit has been done by them? - HELD THAT:- The provisions of Rule 6 are very clear and without any ambiguity. The appellant has been suo moto taking credits even after the issue of previous show cause notices. In a few cases relating to Rule 6 of CCR 2004, orders have also been passed by the department deciding the matter, as is observed from the Appeal Memorandum filed by the appellants. The Hon’ble Supreme Court in a seven Judge Bench judgement in the case of Smt. Ujjam Bai Vs State of Uttar Pradesh [1962 (4) TMI 90 - SUPREME COURT] have held that the binding force of a decision which is arrived at by a taxing authority acting within the limits of the jurisdiction conferred upon it by law cannot be made dependent upon the question whether its decision is correct or erroneous. For, that would create an impossible situation - the appellant after receipt of orders from the department relating to erroneous credit taken by them as per Rule 6 of CCR 2004, cannot continue to plead ambiguity in the interpretation of the said provision and claim that having reversed wrongly taken credits, that too as per their interpretation of the Rule, the imposition of interest and penalty is unsustainable. Their plea in this regard also fails. Appeal dismissed.
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