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2016 (1) TMI 768 - CESTAT CHENNAI

2016 (1) TMI 768 - CESTAT CHENNAI - TMI - Cenvat Credit - Allocation of input services to the concerned department as earned by the Table-C department - appellant provides taxable service as well as exempted service - appellant's submission is that when the records clearly demarcated the extent of credit allocable to departments in Table-A and Table-B that ought to have been verified by the Revenue before questioning. But that was not done - Held that:- Once the conduct of the appellant in the m .....

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exempted service, disallowance of entire credit of ₹ 1,11,07,075/- allocated to Departments in Table-A providing taxable service is contrary to the principal of proportionality. Therefore, entire disallowance does not call for any decision in favour of Revenue.

As an abundant caution, to make sure that the mathematical exercise is properly made by the appellant for allocation of credit rationally, the matter is remitted to the Adjudicating Authority to a limited extent to examin .....

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RIASAMI, TECHNICAL MEMBER For the Petitioner : Shri Raghavan Ramabadran, Advocate For the Respondent : Shri K. Veerabadhra Reddy, JC (AR) ORDER PER D.N. PANDA The precise question that has been raised in this appeal is whether the cenvat credit of service tax paid on input services availed by service departments of appellant allocated to the departments providing taxable service and exempted service shall disentitle the appellant to such credit. Further, whether for allocation of cenvat credit o .....

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se services 12 6 Cyber Café 15 7 International Business 16 8 Technology 31 TABLE-B Exempted Services Sl. No. Name of the SBU Code No. 1 Software dev & E-learning 53 TABLE - C Accounting /support services or common services received Services Sl. No. Name of the SBU Code No. 1 Finance 32 2 Human Resource 33 3 Administration 34 4 Corporate 35 3. Relying on the above 3 tables, it is submitted by Appellant that the 8 departments tabulated in Table-A provide taxable services. That is undisp .....

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tioned by the Revenue on the ground that part of the input credit of departments in Table-C was also allocated to department in Table-B. Appellant is not entitled to the cenvat credit claimed by it since Table-B department provide exempted service. Appellant explains that the input credit earned by the departments in Table-C was allocated to the Departments in Table-A & B on the ratio of the turnover. However, the cenvat credit allocated to the Departments-C was reversed which is undeniable .....

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ore, entire action of the adjudicating authority is erroneous in law when the appellant by its conduct has demarcated the proportion of credit admissible and not admissible to it. Accordingly, it prays that Revenue is at liberty to examine the veracity of the appellant as to the calculation based on the data of the turnover. 6. Supporting adjudication, on the other hand, Revenue's submission is that the appellant is not required to go through the exercise of the allocation and claim of credi .....

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turer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the qu .....

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ble to him, namely :- (i) the manufacturer of goods shall pay an amount equal to ten per cent of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent of value of the exempted services; or (ii)the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services .....

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l not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under cause (ii) of sub-rule (3), the manufacture of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Exci .....

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turer of goods or the provider of output service shall, determine and pay, provisionally, for every month,- (i) the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total va .....

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the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and .....

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the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exem .....

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t determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short- paid, be liable to pay interest at the rate of twenty-four per cent per annum from the due date, i.e., 30th June till the date of payment, where the amoun .....

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or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:- (i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount .....

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en the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i) where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer .....

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rules made thereunder. Explanation II. - The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENV AT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III. - If the manufacturer of goods or the provider of output service fails to pay the am .....

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not possible. Appellant failed to comply with the condition prescribed by Rule 6 (3) read with Rule 6 (3A) of the CCR 2004. Therefore, the adjudicating authority has rightly denied the entire cenvat credit of ₹ 1,11,07,075/-. 7. Heard both sides and perused the records. 8. Factually, the appellant has made its case very clear that it had received input services for its departments tabulated in Table-C. The input tax suffered on such services were allocated substantially to the departments .....

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R 2004 makes clear that sub-rule (3) contains overriding provision which is independent in its nature irrespective of anything stated in sub-rule (1) and sub-rule (2) of CCR 2004. When sub-rule (2) is read that throws light that appellant has chosen a way of maintaining its record which enabled it to substantially allocate the cenvat credit of service tax suffered by the departments in Table-C and partly to the department in Table-B. It has complied to the provisions of sub-rule (2) of Rule 6. O .....

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