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2016 (6) TMI 866 - CESTAT HYDERABAD

2016 (6) TMI 866 - CESTAT HYDERABAD - 2016 (43) S.T.R. 411 (Tri. - Hyd.) - Cenvat Credit - Scope of Rule 6 - pay an amount @8% (6% w.e.f. 07/07/2009) or to reversal proportionate credit - failure to exercise the option under Rule 6(3A) - Supply of tower and tower parts to M/s. RRB Energy Ltd. Which are used as parts of Wind Operated Electricity Generator (WOEG) - Exemption under Sl.No.84 of the Notification No.6/2006-CE dt. 01/03/2006 - Held that:- The contention of the department is that when t .....

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f the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing. - The Rule does not lay down any such restriction. The procedure and conditions laid in Rule 6(3A) is intended to make Rule 6(3) workable and not to take away the option available t .....

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Order per: Sulekha Beevi, C.S. ] Brief facts:- The appellants are engaged in manufacture of M.S. galvanized towers & tower parts. They had supplied tower and tower parts to M/s. RRB Energy Ltd. Which are used as parts of Wind Operated Electricity Generator (WOEG) and claimed exemption of duty under Sl.No.84 of the Notification No.6/2006-CE dt. 01/03/2006 (Sl.No.13 of the list No.5). The department took the view that towers and tower parts cleared by appellants to M/s. RRB Energy Ltd. are no .....

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otification No.6/2006-CE dt. 01/03/2006 did not maintain separate accounts and thereby are liable to pay 10% / 5% of sale price of exempted goods as provided in Rule 6(3)(i) of CENVAT Credit Rules, 2004. The demand raised in the show-cause notice was ₹ 26,55,364/- being the amount payable on goods valued at ₹ 3,81,58,865/- cleared during the period March 2009 to September 2009, along with interest and penalty. After adjudication the adjudicating authority confirmed the demand, intere .....

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facturing activity. The appellants are galvanizing the towers by immersing them in huge containers of molten zinc. It is not practical or economically viable to maintain two set of tanks, and galvanize the towers meant for exempted clearances and towers meant for dutiable clearances separately. That even with regard to input services such as telephone services, security services, and transportation of goods by road, the maintenance of separate accounts is not possible, as all goods are cleared f .....

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mpted services as per the formula prescribed under Rule 6(3A). The amount/duty payable by appellant under second option is ₹ 3,70,612/- as calculated by appellants. Whereas the amount payable under the first option will come to ₹ 24,55,364/-. The appellants chose the second option and reversed the proportionate credit of ₹ 3,70,612/-. The learned counsel argued that the demand is raised merely on the ground that appellants failed to comply the procedure of exercising the option .....

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reversal of proportionate credit as under Rule 6(3)(ii) and not payment of 5% / 10% as under Rule 6(3)(i). The failure to intimate the option exercised would in case be only a technical breach. In addition, it is submitted that till date they did not utilize the CENVAT credit availed during the period March 2009 to September 2009 on the inputs used in the manufacture of exempted goods. They furnished a statement showing CENVAT credit balance during this period before the authorities. That non-u .....

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rement to intimate the department in writing cannot be construed as directory. Without intimating the department about the option and not maintaining separate account, the appellants have chosen to reverse the credit and are now trying to take shelter contending that it is only a procedural lapse. That as the appellants have not intimated the department about their exercise of option they are bound to pay the duty amount as calculated under first option, Rule 6(3)(i), and that the demand of duty .....

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AT credit shall not be allowed on such quantity of input or input services which is used in the manufacture of exempted goods or for providing exempted services. Sub-rule (2) of Rule 6 states that in case the manufacturer or service provider uses common inputs/ input services, then such manufacturer or service provider has to maintain separate accounts and credit is to be taken only on that quantity of input or input service which is intended for manufacture of dutiable goods or providing exempt .....

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ted goods and an output service provider shall pay 8% (6% w.e.f. 07/07/2009) of the value of the exempted services; or b) reverse the credit on inputs and input services pertaining to exempted goods and exempted services as per the procedure and conditions prescribed in Rule 6(3A), and it also prescribes the formula for calculation of the proportionate credit to be reversed. 6. For better appreciation, relevant part of Rule 6(3A) is reproduced as under:- Rule 6(3A) For determination and payment .....

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e option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercis .....

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e proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing. The Rule does not lay dow .....

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