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M/s. Mercedes Benz India (P) Limited Versus Commissioner of Central Excise, Pune-I

Reversal of Cenvat Credit - various option available as per Rule 6 of CCR - whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rule 6(3A) alongwith interest following the option available under Rule 6(3)(ii) - Held that:- Appellant has availed Cenvat Credit in respect of common input services, which has been used in relation to the manufacture .....

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er Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. - as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under Rule (3A) of Rule 6, therefore to fulfil the condition, assessee should pay the said amount, which has been complied by the appellant.

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services used in the exempted goods. It is also observed that in either of the three 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% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be f .....

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/CEX/P-I/2012 dtd. 14/11/2012 passed by the Commissioner of Central Excise, Pune-I, wherein Ld. Commissioner passed following order: 26.1 I confirm the demand of ₹ 24,71,93,529/- against the assessee i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune, in terms of Explanation-III to sub rule (3D) of Rule 6 of Cenvat Credit Rules, 2004 read with Rule 14 ibid and Section 11A(1) of the Central Excise Act, 1944. I further order appropriation of an amount of ₹ 4 ,06,785 /- already paid by .....

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her impose a penalty of ₹ 24 ,71,93,529 /- on the assessee, i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune under the provisions of Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 27. I give an option to the assessee i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune under Section 11AC(1)(C) of Central Excise, Act, 1944, to pay 25% of the penalty amount as imposed in para 26.3 above, provided the assessee pays the entire amount of demand .....

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alongwith their motor vehicle in the same premises. In case of trading activity, the appellant imports cars directly from Daimler Chrysler, Germany. 2.1 In terms of the order received from their dealer network and sell the same to different customers. The appellant maintains common balance sheet for their manufacturing as well as trading activity. The appellant availed Cenvat credit under Cenvat Credit Rules, 2004 on input and input services used in relation to the manufacture of finished goods. .....

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oaching Services, Information Technology Services for both their manufacture activity as well as trading activity and had availed credit on input services amounting to ₹ 4,99,92,897/-. On inquiry by the department with the appellant, it was noticed that the appellant availed credit on the input services which are used in relation to the goods manufactured by them cleared on payment of duty as well as motor vehicle imported as such and traded in the domestic market. 2.2 The appellant neithe .....

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alculated and reversed Cenvat credit amounting ₹ 4,06,785/- vide service tax Cenvat debit entry No. 69/13.03.2012 and paid interest @18% amounting to ₹ 20,993/- under section 75 of the Finance Act, 1994 vide PLA entry No. 273/13.03.2012 and intimated the same vide their letter dated 14/3/2012. 2.3 The show cause notice was issued wherein it was alleged that the appellant while reversed the amount of Cenvat Credit and paying the interest had not followed the procedure as laid down in .....

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(c) of the said rule the appellant becomes liable to calculate and pay amount equivalent to 5% of the value on exempted services. 2.4 In view of the above allegation show cause Notice No. 35/P-V/R-CKN/COMMR/2012 dated 13/4/2012 proposed demand of ₹ 24,71,93,529/- which is equivalent to 5% of the value of traded goods i.e. ₹ 494,38,70,577/- on exempted services i.e. trading activity of the motor vehicle. It was also proposed to adjust an amount of 4 ,06,785 /- already paid by the appe .....

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Ld. Sr. Counsel for the appellant made following submissions: (a) There is no dispute that while availing Cenvat credit appellant have availed Cenvat credit strictly as per the provisions made in the Cenvat Credit rules inasmuch as services which are input services as defined under 2(l) of the CCR, Rules. The show cause notice also not raised dispute on the correct availment of Cenvat Credit. In the show cause notice the Revenue is restricted to denial of proportionate credit attributed to tradi .....

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aside. (b) In the amendment to Rule 2(e) of the CCR vide Notification No. 3/2011-CE (NT) dated 1/3/2011 by an explanation trading activity was included in the definition of exempted services w.e.f. 1/4/2011 thus w.e.f. 1/4/2011 the appellant was liable to reverse the Cenvat Credit availed on account of input and input services, which are used in the providing exempted services in terms of Rule 6(i) of CCR, 2004. As per the provision of Rule 6(i) the appellant is not entitle to avail Cenvat Credi .....

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letter dated 14/3/2012. Ld. Commissioner, without considering ratio of turnover from manufacturing activity vis a vis trading activity has merely confirmed the demand at 5% of the total exempted turnover i.e. trading of imported cars which cannot be sustained and being completely perverse the impugned order is liable to be set aside. (c) Ld. Commissioner confirmed the demand equivalent to the 5% of the trading turnover despite admitting the fact that the appellant have reversed the required cre .....

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escribed particulars specified under clause (a) of sub rule (3A) of Rule 6 of CCR, 2004. The clause (a) nowhere specified that the manufacturer or provider of out put service shall exercise such option at the beginning of the financial year for which option to be exercised. The provisions does not debar a manufacturer or provider of output service from exercising option in the middle of the year. In fact Rule 6 (3A)(a)(ii) states that manufacturer ought to mention date from which the option unde .....

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y basis. The said amount is only a provisional amount. If the manufacturer / provider of output service has failed to make the payment provisionally or there is short payment in any month then manufacturer / provider of out service is liable to make final payment on 30 th June of succeeding financial year alongwith interest as provided in clause (d) and clause (e) of sub rule (3A). (d) In The present case the appellant have correctly exercised the option under Clause (a) of sub rule (3A) and als .....

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services and Cenvat credit of input and input services lying in balance as on date of exercising the option. These informations directly or indirectly were furnished and were available with the department. Since the appellant is registered manufacturer and filing their monthly ER1 return, the name, address and registration number is right from the date of registration is available with the department. As regard the date of option, the appellant while reversing the credit under an intimation to t .....

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l the time. Moreover the intimation has been given by the appellant vide their letter dated 14/3/2012, therefore, even if the intimation in the prescribed format was not given but information required therein was otherwise very much provided to the jurisdictional Central Excise authority. In view of this fact, it cannot be said that the appellant have not complied with the procedure as laid down. It is the submission of the Ld. Counsel that is not provided under the law that if there is any proc .....

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ellant, nor it is part of Cenvat Credit availed by the Appellant. He submits that when the options have been provided, the department has no say for choice of the assessee, the assessee who has liberty to choose any of the option and therefore in the appellant case, the appellant has opted for option available under rule 6(3)(ii) of Cenvat Credit Rules, therefore department has no role to decide regarding any other option available in these rules. He also refers the adjudication order passed by .....

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ect and illegal. 4. Shri. Hitesh Shah, Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that under rule 6(3), following options are available: (i) Pay an amount equal to five per cent of the exempted goods and exempted service; or (ii) Pay an amount as determined under sub-rule (3A); As per clause (i) the assessee is required to pay 5% of the value of exempted goods, in clause (ii) assessee is required to pay equal amount of .....

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i.e. trading of motor vehicle but procedure was not followed inasmuch as in the beginning of the financial year, have not intimated in writing to the Jurisdictional superintendent regarding the availment of the option provided under clause (ii) of Rule 6(3). They have not furnished the information as provided under clause (i) to (v) of sub clause (a) of Rule 6(3A). 4.1 The appellant failed to calculate Cenvat credit to reversed on monthly basis, therefore the substantive requirement of procedure .....

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ept to follow the provision of Rule 6(3)(i) and accordingly they were required to pay 5% of the value of the exempted services (trading of cars). 4.2 Ld. A.R. in support of his submission that procedure must be scrupulously followed, else benefit provided under law, the benefit cannot be extended. He placed reliance on following judgments: (a) Commissioner of C.Ex. Ahmedabad Vs . Ramesh Food Products [2004 (174) E.L.T. 310 (S.C.)] (b) Kamani Foods Vs . Collector of Central Excise, Patna [1995 (7 .....

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2) E.L.T. 9 (S.C.)]. (h) Assam Tubes Ltd. Vs . Commissioner of C.Ex. Shillong [2014 (313) ELT 746 (Tri. Kolkata)] (i) Madras Cements Ltd. Vs . Commissioner of Central Excise, [2010 (254) ELT 3 (S.C.)] (j) R.R. Paints Pvt. Ltd. Vs . Commissioner of Central Excise, Mumbai [2013 (288) E.L.T. 289 (Tri. Mumbai)] (k) Commissioner of C.Ex. Thane- Vs. Nicholas Piramal (I) Ltd. [2009 (244) ELT 321 (BOM.)] (l) Union of India Vs . Supreme Steels and General Mills [2001 (133) ELT 513 (SC)] (m) Commissioner .....

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ollowing the option available under Rule 6(3)(ii). Provisions for payment of 5% of the sale value of exempted goods is provided as one of the option given in Rule 6(3) of Cenvat credit Rules which is reproduced below:- RULE 6. [Obligation of a manufacturer or producer of final products and a [provider of output service.] (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input .....

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. - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2 . - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereun .....

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ation to the manufacture of dutiable final products excluding exempted goods; (iii) for the provision of exempted services; (iv) for the provision of output services excluding exempted services; and (b) the receipt and use of input services- (i) in or in relation to the manufacture of exempted goods and their clearance upto the place of removal; (ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; (iii) for .....

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to him, namely:- [(i) pay an amount equal to five per cent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under subclauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-claus .....

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ause (i) shall be [six percent.] of the value so exempted] [Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (i) shall be an amount equal to 2 per cent. of value of the exempted services.] Explanation I .- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted ser .....

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cturers of the goods shall follow certain procedure and conditions as provided under Sub Rule (3A)(a) (i) to (iv) inasmuch as the appellant have not given said information in writing to the Jurisdictional Superintendent of Central Excise. Secondly the appellant, as provided under Clause (b) of sub rule (3A) have not paid the amount of Cenvat on monthly basis and paid after almost 11 months. 5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided:- (i .....

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ter dated 14/3/2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit which they have made alongwith interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2012, in accordance to which, the appellant are supposed to an amount equivalent to Cenvat Credit o .....

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ule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub rule (3) (ii), we find that foremost condition is that the appellant is required to p .....

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appellant. 5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the compliance as provided under Clause (a) of Sub Rule (3A) of Rule 6 the appellant while exercising this option is required to intimate in writing to the Jurisdictional Superintendent, Central Excise, the following particulars namely: (i) Name, address and registration No. of the manufacturer of goods or provider of output service; (ii) Date from which the option .....

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. The appellant has been filing their returns regularly on monthly basis to the department. On perusal of the copies of the such return submitted alongwith appeal papers, it is observed that the particulars, as required under clause (a) of sub rule (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitte .....

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but it is a common sense that intention of any option should expressed before exercising the option, however the delay can be taken as procedural lapse. We also note that trading of goods was considered as exempted service from 2011 only, thus it was initial period. We are also of the view that there is no condition provided in the rule that if a particular option, out of three options are not opted, then only option of payment of 5% provided under Rule 6(3)(i) shall be compulsorily made applica .....

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ch option to be exercised and not the Revenue to decide the same. 5.4 We find that the appellant admittedly paid an amount of ₹ 4 ,06,785 /- plus interest, this is not under dispute. Therefore in our view, 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 of ₹ 24,71,93,529/- of the total value of the vehicle amounting to ₹ 494,38,70,577/- sold in the market cann .....

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ttributed to the input or input services used in the exempted goods. It is also observed that in either of the three 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% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option .....

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