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2022 (10) TMI 695 - AT - Service TaxReversal of CENVAT Credit - trading activity - exempted service or not - common input service which are used for both dutiable and exempted services - non-maintenance of separate records - Rules 6(3)/6(3A) of Cenvat Credit Rules, 2004 - whether appellant is required to pay 5% or 6% of total sale value of the goods traded by them in terms of provisions of Rule 6(3) when the appellant agree for reversal of actual credit attributed to the quantum of trading sale (trading activity) in terms of Rule 6(3A) following the option available under Rule6(3)? - HELD THAT:- The appellant in the present matter agree to reverse to cenvat credit, this is not under dispute. Therefore, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount on the total value of the trading activity cannot be demanded. Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods/ exempted service. It is also observed that in either of the two options given in sub-rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% or 6% will automatically be applied. The demand confirmed by the adjudicating authority is legally not correct and therefore the same cannot be sustained - the appellant are required to reverse the proportionate credit relatable/ attributable to the exempted activity - the matter is remanded for the limited purpose of calculating the proportionate reversal credit in terms of Rule 6 of Cenvat Credit Rules 2004 in this matter - appeal allowed by way of remand.
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