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2015 (11) TMI 50 - CESTAT MUMBAI

2015 (11) TMI 50 - CESTAT MUMBAI - 2016 (41) S.T.R. 673 (Tri. - Mumbai) - Credit availed on exempted services - interest earned by the bank on loans and advances, whether it is exempted service or taxable service - Revenue contends that appellant has not complied with the requirements of Rule 6(3) (ii) and Rule (3A) of Rules, 6 thus liable to pay amount @ 8% of value of exempted goods and he should have paid CENVAT credit amount along with 24% interest - Demand raised under Rule 6(3)(i)is sustai .....

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vailed by them alongwith interest @ 24% he could not be asked to pay 8% of interest amount in terms of Rule 6(3)(ii)and procedure as prescribed under sub rule (3A) of Rule 6 is not relevant because it is relevant only when appellant undertake to pay proportionate credit attributable to exempted service - Demand raised under Rule 6(3)(i) is not sustainable - Decided in favour of assessee. - APPEAL NO. ST/89839/14-MUM - Final Order No. A/3186/2015-WZB/SMB - Dated:- 10-7-2015 - Mr. Ramesh Nair, Mem .....

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s. The availed Cenvat credit in respect of common input services amounting to ₹ 3,585/- during the period April 2008 to March 2009. Show cause notice dated 13/6/2013 was issued to the appellant wherein it was alleged that the appellant is engaged in various banking and other financial services out of which certain services i.e. interest on cash credit and interest on term loans are exempted services therefore, the appellant has availed Cenvat credit on common input services it has been use .....

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demand of ₹ 32,10,030/- under Rule 6(3)(i) of Cenvat Credit Rules. In addition he ordered recovery of interest under Rule 14 of Cenvat Credit Rules, 2004 read with Section 75 of Finance Act, 1994. Penalty of ₹ 32,10,030/- was imposed under Seciton 78 and penalty of ₹ 5,000/- was imposed under Rule 15(a). Aggrieved by the said order in original, appellant filed appeal before the Commissioner(Appeals), who upheld the order in original. Being aggrieved by the impugned order the ap .....

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or the purpose of Rule 6(3)of Cenvat credit Rules, amount of interest shall be kept outside the value and thus not be relevant for reversal of credit under rule, 6(3) of CCR. In view of the above notification and the clarification of the board, in the present case the rule 6(3) is not at all applicable as the period involved is April, 2008 to March, 2009, during which interest was not treated as exempted service. He further submits that as regard the allegation of the Revenue that appellant has .....

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hich is admittedly for the period April, 2008 to March, 2009. He further submits that in fact Rule 6(3) in any case shall not apply in the appellants case for the reason that the appellant, not only proportionate to exempted services but even entire service tax credit reversed which was total of meager amount of ₹ 3585/- alongwith interest @ 18%. It is his submission that once the entire credit has been reversed along with interest, any of the cenvat credit rules shall not apply for the r .....

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envat credit attributable to input services used in or in relation to exempted services, subject to condition and procedure specified in subject rules (3A). It is his submission that entire provisions is to ensure that assesee pays an amount equivalent to the Cenvat credit attributable to exempted services. From the present case, the appellant admittedly not only paid service tax attributable to the exempted service but entire service tax credit has been reversed alongwith interest. As regard pr .....

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t the appellant as stated above, reversed the entire service tax credit alongwith interest, the case is covered by retrospective amendment made vide Section 73 of Finance Act, 2010. In view of the said retrospective amendment all the cases on similar issue stood regularized on the condition that the assesee pays an amount equal to the Cenvat credit attributable to the exempted goods or services alongiwth 24% interest. The Ld. Counsel submits that in the present case, since the appellant has paid .....

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that for availing options under Rule 6(3) (ii) there is procedure prescribed such as intimation to the Jurisdictional Superintendent in writing and the amount to be paid should be in accordance with Rule (3A) of Rules, 6 of CCR. The appellant have not complied with the said provisions accordingly the option available under Rule 6(3)(ii) is not available to the appellant. Since the appellant have not followed the procedure for maintaining the separate account, the only option left is to pay an a .....

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said procedure and did not file any application to the Commissioner for claim the amnesty scheme therefore at this stage the benefit of such scheme can not be extended to the appellant. He heavily placed reliance on the Honble Bombay High Court judgment in case of CCE, Pune Vs. Nicholas Piramal (India) [2009(244) ELT 321(Bom)]. He submits that in view of the above judgment assessee is required to follow the procedure as prescribed under Rule 57(C) of erstwhile Central Excise Rules, 1944 and Rul .....

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March 2012 and the relevant paras are reproduced below: Point 20. Rule 6 of Valuation Rules prescribed inclusions and exclusions to the taxable value. Following changes are being made here- i. - ii. In sub-rule (2) clause (iv) regarding exclusion of interest on loans is proposed for substitution with interest on (a) deposits; and (b) delayed payment of any consideration for the provisions made (service/goods) . this will be keep such amounts outside the value and thus not be relevant for revers .....

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ess interest paid on deposits, subject to a minimum of 50% of interest paid on deposits. For the non-financial sector it is being proposed than they may reverse credits on gross interest basis. From the above clarification and I also read amendment notification No. 11/2012-ST dated 17/3/2012, interest, prior to 17/3/3012 was excluded from the taxable value and thereafter it was explicitly made exempted. Therefore the board has clarified that after 17/3/2012 the interest of bank loan become exemp .....

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ire service tax credit availed by them during the 2008 - 2009 alongwith interest @ 24% (18% + 6% subsequently) therefore even in view of provisions under Rule 6(3), the appellant could not be asked to pay 8% of the interest amount in terms of Rule 6(3)(ii). I found that during the period involved 2008-09, apart from provisions of Rule 6(3)(i) another option under Rule 6(3)(ii) was available to the appellant according to which the appellant was under obligation to pay an amount equal to Cenvat cr .....

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)(ii), appellant could not asked to pay any further additional amount. I also find that there were nationwide cases against many assesees on this issue and it was observed that as against Petty amount of Cenvat credit huge amount of lacs and crores were demanded from the assessee invoking provisions of Rule 6(3). After realizing serious anomaly in the provisions the government brought retrospective amendment in Rule 57 CC, Central Excise Rules, 1944 and Rule 6 of Cenvat Credit Rules, 2002/2004. .....

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