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2023 (8) TMI 1140 - HC - Central ExciseApplicability of amendment to Rule 6 of the CENVAT Credit Rules, 2004 with retrospective effect - manufacture of dutiable excisable goods as well as exempted goods, consuming common Cenvated inputs and input services - non-maintenance of separate accounts in respect of input services used / consumed in or in relation to manufacture of excisable and exempted finished goods - procedure specified in sub-rule (3A) of Rule 6 of the CCR 2004 not followed. The periods subject matter of the show cause notice in question are the periods beginning with 10 September 2004 till 31 March 2008 and the subsequent period post 1 April 2008 upto 31 December 2010. HELD THAT:- Rule 6 underwent an amendment in the year 2006, 2007 and in the year 2008. It is relevant to note the amendment as brought about to subrule (3) and incorporation of Rule 3A - It is clearly seen from the reading of sub Rule (3A) of Rule 6 which was introduced for determination of payment of amount payable under clause (ii) of sub-rule (3), that the manufacturer of goods or the provider of output service shall follow the procedure and conditions as set out therein. Further Rule 6 was retrospectively amended by the Finance Act, 2010 which enabled the respondent to make adjustment, namely, that even if the respondent failed to maintain a separate account, in view of the retrospective amendment, it was entitled to reverse the proportionate cenvat credit or option of paying an amount equal to 10% on exempted goods, and that could not have been enforced on the assessee. In the facts of the present case, it is clear from the record and as rightly observed by the CESTAT that under Rule 6 of the CCR, 2004, as amended from time to time, in case of common input services used for manufacture of both exempted and dutiable goods, the respondent had three options available, firstly, to maintain separate accounts in respect of the common inputs and input services used for manufacture of exempted & dutiable goods and taxable and exempted service (Rule 6 (2)); or secondly, to reverse the proportionate Cenvat credit in respect of the inputs and input services used for proving exempted goods and exempted services, by following the procedure as prescribed by Rule 6(3)(ii); or thirdly, to reverse the Cenvat credit at the rate of 5% (earlier 10%) of value of exempted goods under Rule 6 (3)(i) as amended from 1 April 2008. It is clear that the respondent was not maintaining separate account in respect of input services used by it, hence, the available option for the respondent was to reverse the proportionate cenvat credit as applicable either under Rule 6(3)(i) or Rule 6(3)(ii). It is also clear that the benefit of reversing the proportionate credit was extended with retrospective effect in cases where common input and input services were used for dutiable and exempted products. Insofar as the period from 1 April 2008 to 31 December 2010 is concerned, even prior to issuance of a show cause notice, the respondent had reversed the entire amount of proportionate credit alongwith interest due in respect of the said period namely an amount of Rs. 1,22,98,068/- plus Rs. 17,49,730/-. What was imperative was not issuance of a show cause notice but the pendency of dispute relating to adjustment of credit of input used or exemption on final product relating to the period beginning from 10 September 2004 and ending on 31 March 2008 (both days inclusive), being the pending date on which the Finance Bill received assent of the President. It is rightly observed by the CESTAT that when for such period the dispute has arisen only in such event, a show cause notice was issued and hence, the case of the respondent for the period 2007-08 was covered by the amendment made by way of insertion of subrule (7) of Rule 6 of CCR, 2004 by the 2010 Amendment. The respondent would be correct in its contention when it submits that in a similar situation the Division Bench of this Court on applicability of Rule 6 had held against the revenue and in favour of the assessee in the case of THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S. IVP LIMITED [2017 (3) TMI 234 - BOMBAY HIGH COURT] as also in the case of THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S. NICHOLAS PIRAMAL LTD. [2016 (10) TMI 827 - BOMBAY HIGH COURT]. The question is answered in favour of the assessee and against the revenue - appeal dismissed.
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