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2015 (11) TMI 1047 - CESTAT BANGALORE

2015 (11) TMI 1047 - CESTAT BANGALORE - 2016 (42) S.T.R. 202 (Tri - Bang.) - CENVAT credit - credit on exempted service - non maintenance of separate accounts - failure to exercise the option to avail the provisions of Rule 6(3A) in writing - Held that:- Commissionerís conclusion in the impugned order that in view of the retrospective amendment to Cenvat Credit Rules, procedure followed by the assessee can be said to have fulfilled the requirement in my opinion is not correct. This is in view of .....

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ersal has been done as required under Rule 6(3) (ii) of the Cenvat Credit Rules 2004. In view of the amendment in 2010, once the amendment is not applicable, the benefit of subsequent reversal will not be available. The amendment brought out in the year 2010 clearly provided for subsequent reversals by the manufacturers where they had omitted to reverse the credit earlier and according to the law they would have been required to pay 6%/8%/10% as the case maybe.

Option to avail the pro .....

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ntion of the legislature.

The learned DR countered this by submitting that the fact that the explanation provides that it shall not be withdrawn during the remaining part of the financial year shows that it has to be exercised within the same financial year. However it is difficult to come to the conclusion that because of this particular clause, the explanation has to be understood to mean that option should be exercised within the financial year. - However it is difficult to come to .....

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rongly as held by me and further in view of the complexity of the nature, in my opinion as a special case, the assessee can be allowed to regularize the activity undertaken by them by submitting a detailed letter as contemplated in Sub-rule (3A) of Rule 6 of Cenvat Credit Rules. Whether it is rectifiable or not is another complicated question which in my opinion goes in favour of the assessee mainly because of the discussion given above and entire facts and circumstances of this case.

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ber For the Petitioner : Mr. Dayanand K, CA And M/s. Vishnu Daya & Co., For the Respondent : Mr. Pakshi Rajan, AR ORDER Per : B.S.V. MURTHY 1.1. During scrutiny of the ST3 Returns for the year 2008-09, it was observed that the appellant was providing taxable services to SEZ units and the same were exempted vide Notfn. No. 4/2004 ST dated 31.03.2004. The appellant was also providing taxable services in Jammu & Kashmir Region. Since the appellant was providing taxable as well as exempted s .....

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unt equal to 8% of the value of the exempted services or (ii) shall pay (reverse) an amount equivalent to the Cenvat credit attributable to the input services used for providing the exempted services on monthly basis subject to the conditions and procedures specified in sub-rule (3A). 1.2 On finding that appellant had not followed the procedure laid down, proceedings were initiated culminating in confirmation of demand for the amount as per the provisions of Rule 6(3) (i) of Cenvat Credit Rules .....

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ance Act 2010 carried out to the provisions of Rule 6 and set aside the impugned order taking note of the fact that appellant had reversed the proportionate credit on the value of exempted services subsequently with interest. Revenue is in appeal against this decision. Appellant-assessee has filed cross objections. 2. The learned AR would submit that the retrospective amendment to Cenvat Credit Rules made in Finance Act 2010 related to only manufacturers and did not cover service providers. Ther .....

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providing exempted and dutiable services were not maintained. 3. Learned CA on behalf of the appellant would submit that it cannot be said the requirement of Rule 6(3) (ii) is a substantive requirement and he relies on the decision in the case of Foods, Fats & Fertilisers Ltd. Vs. CCE, Guntur [2011 (22) S.T.R. 484 (Tri.-Bang.)]. Further he also relies upon the decision in the case of J.B. Mangharam Foods Pvt. Ltd. Vs. CCE, Indore [2010 (258) E.L.T. 575 (Tri.-Del.)] to submit that the assess .....

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ons of law. Learned DR would rely upon the decision in the case of CCE, Thane - 1 Vs. M/s. Nicholas Piramal (India) Ltd. reported in [2009-TIOL-649-HC-MUM-CX] wherein it was held by the Honble High Court of Bombay that reversal of credit is no substitute for payment of 8%. 4. I have considered the submissions made by both the sides. Commissioner s conclusion in the impugned order that in view of the retrospective amendment to Cenvat Credit Rules, procedure followed by the assessee can be said t .....

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clarity it is not appropriate and proper to read the law differently. In this case there is no such ambiguity or lack of clarity in the amendments or Finance Act brought out in the year 2010. Therefore I am unable to consider this submission. The second conclusion the Commissioner has reached is that the omission or intention is only technical and reversal has been done as required under Rule 6(3) (ii) of the Cenvat Credit Rules 2004. In view of the amendment in 2010, once the amendment is not .....

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to the manufacturers and service providers. The first option is to maintain separate accounts in respect of services and inputs used for exempted/dutiable goods manufactured and services provided. If an assessee opts not to maintain, the Rule provides for another option to which provides for exercising of an option by the manufacturer/provider of output service in accordance with provisions of Rule 6(3A). Rule (3A) provides that the manufacturer or provider of output service has to be intimated .....

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l of credit in advance etc. It can be said that provisions of Rule (3A) provided detailed procedure to be followed by a manufacturer or an output service provider who does not opt for maintenance of separate account. It is not necessary to reproduce the Rule (3A) and the Sub-rules because they are very detailed and even give the formula for calculation of proportionate credit etc. Therefore the situation after the amendment of the Rules w.e.f. 01.03.2008 underwent a drastic change as far as the .....

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such decision and there is no dispute that that was the situation prior to 01.03.2008 and wherever credit was reversed irrespective of the date of reversal, a view was taken that such reversal has to be considered as having not availed the Cenvat credit at all. But the fact is that Sub-rule (3A) of Rule 6 of Cenvat Credit Rules provides a detailed procedure for reversal of credit and also exercising of an option to either maintain separate account or follow the procedure. In such a situation ca .....

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n be exercised at any time or reversal can be made subsequently would be totally against the law as well as the intention of the legislature. 7. The other decisions cited by the learned CA also relate to the period prior to 01.03.2008 and therefore it may not be appropriate to consider them in view of the observations made by me hereinabove. 8. The Tribunal is the last fact finding authority and the law has to be applied to the facts of each case. Therefore it would not be appropriate for me to .....

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relied upon by the learned CA to submit that this letter dated 30.07.2009 can be treated as an option exercised by the assessee as per the provisions of Rule 6 (3A) of CCR 2004. It was submitted that out of nearly ₹ 1.9 crore (Rupees One Crore Nine lakhs approximately) of exempted services, about ₹ 1.01 crore (Rupees One Crore One Lakh approximately) is attributable to clearances to SEZ which is covered by the provisions of Rule 6(3A) and therefore that cannot be considered as an exe .....

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ould be considered as an option, I have to observe that it is not in the format which as proposed does not give all the details which are required to be given as per the provisions of Rule 6 (3A). It is the submission of learned CA that this was the first year when the new procedure was introduced and therefore this omission of not incorporating all the details and the reasons for consideration of the letter has not fulfilled all the provisions of Rule 6(3A) may be accepted as a special case. He .....

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the learned CA was as per the definition of taxable service clearance to Jammu and Kashmir were exempt from payment of service tax in view of the fact that provisions of Section 64 excludes Jammu & Kashmir for the purpose of levy of service tax. For better appreciation the Section is reproduced. Section 64. Extent, commencement and application (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. (2) It shall come into force on such date as the Central Governm .....

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whole of the service tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act; 13. Learned CA submitted that when the definition is read with the provisions of Section 64 and Section 66 of Finance Act 1994, the conclusion is that if a service is provided to Jammu & Kashmir State and even if it is included in the list of services in Section 66 of Finance Act 1994, it cannot be considered as an exempted service. This is because in resp .....

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e is not included in Section 66, it has to be considered as an exempted service would show that in respect of services provided to Jammu & Kashmir State, it has to be considered as an exempted service. In my opinion, if a non-taxable service can be considered as an exempted service, a taxable service provided in Jammu & Kashmir has to be considered as exempted service. Learned CA submitted that after 01.07.2012, the definition of service tax provided in Section 66 of Finance Act 1994 spe .....

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f Cenvat Credit Rules 2004. The question that arises therefore is whether the assessee can be given an option to consider the letter given by them on 30.07.2009 as a letter exercising the option to reverse the proportionate credit or not and if so whether they can be allowed to credit good and make good the deficiencies in the letter. I find that even on 03.07.2009, the assessee had taken a stand that they would opt for reversal of proportionate credit and opt to follow the procedure for the Fin .....

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units. The only exempted service we have is the services rendered in the state of Jammu and Kashmir. In this regard we wish to submit that Rule 6(3) of Cenvat Credit Rules has been amended effective from 01.03.2008 and the amended provision provides that where the assessee opts not to maintain separate accounts for the services used both for taxable as well as the exempted output services, the assessee can either reverse proportionate credit attributable to the exempted services, or opt to pay .....

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h we have reversed on 30.06.2009. We have also reversed the credit for the month of April, May and June 2009. We undertake to follow the procedure for 2009-10, and we shall not withdraw the option during this period. We request you to condone the lapse which is procedural. We are ready to pay the interest if required to be paid. They reversed an amount of ₹ 6043/- (Rupees Six Thousand Forty Three only) and submitted a detailed calculation month-wise to show the correctness of the amount wo .....

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ules 2004. For better appreciation the explanation is reproduced as under: 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 services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. It was submitted that the Rule does not say that option should be exercised .....

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