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M/s ZIM Laboratories Ltd. Versus Commissioner of Central Excise And Service Tax, Nagpur

2018 (1) TMI 254 - CESTAT MUMBAI

CENVAT credit - manufacturing as well as trading activity - appellants availing credit on common input service which was used for manufacturing of dutiable goods as well as trading activity - Rule 6(3)(i) of CENVAT Credit Rules, 2004 - Held that: - the appellant have admittedly reversed the credit attributed to the trading activity availing the option available under rule 6(3)(ii). Therefore, Department cannot insist for some other option i.e. Rule 6(3)(i). - As regards the issue that the ap .....

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rtionate CENVAT Credit, which was reversed by the appellant. Therefore, the matter needs to be remanded only for the purpose of re-quantification of proportionate credit as claimed and submitted by the appellant. The demand of 5% of the value of traded goods confirmed invoking Rule 6(3)(i) is not sustainable. - Appeal allowed by way of remand. - Appeal No.E/86103/16 - A/91799/2017 - Dated:- 8-12-2017 - Shri Ramesh Nair, Member (Judicial) Shri G. Natarajan, Advocate for Appellant Shri Ajay Ku .....

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f Rule 6(3)(i) of CENVAT Credit Rules, 2004. The demand was confirmed by the adjudicating authority and ordered for recovery of interest under Section 11AB and also imposed penalty of equal amount under section 11AC. Therefore, the appellants are before me. 3. Shri G. Natarajan, learned Counsel appearing on behalf of the appellant submits that prior to 1.4.2011, the trading activity was not exempted service as the same was brought under the definition of "exempted service" w.e.f. 1.4.2 .....

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t there is option available to the appellant either to pay 5% in terms of Rule 6(3)(ii) or proportionate credit attributed to the trading activity. They claimed an option of Rule 6(3)(ii), which was rejected by the Commissioner and demanded 5% of entire trading turnover. He submits that when the option is available to the appellant, department cannot insist for a particular option. Accordingly, he concedes that they are liable to reverse the actual credit on service attributed to the trading act .....

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ding to the above cited judgments, the assessee was allowed to opt for proportionate credit reversal against the Department s claim of 5% of the value of traded exempted goods. 4. Shri Ajay Kumar, learned Addl. Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that the appellant have not opted for the option of proportionate credit for each financial year, therefore, when the irregularity was detected, the appellant cannot opt .....

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ist for some other option i.e. Rule 6(3)(i). 6. As regards the issue that the appellant was not following the condition for availing the option of Rule 6(3)(ii), I am of the view that it is a procedural requirement and for want of procedural requirement, substantial benefit available to the assessee cannot be denied. This very issue has been considered in various judgments of this Tribunal, therefore, the issue is no longer res integra. In the case of Mercedes Benz India (Pvt.) Ltd. Vs. Commissi .....

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rer of goods or provider of output service; (ii) Date from which the 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. As per the submission of the appellant and perusal of their letter along with enclosed details, it is found that more or les .....

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ising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6(3A), it stood made. 5.3 As regard the contention of the adjudicating authority that this option should be given in beginning and before exercising such option, we are of the view that though t .....

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of payment of 5% provided under Rule 6(3)(i) shall be compulsorily made applicable, therefore we are of the view that Revenue could not insist the appellant to avail a particular option. In the present case admittedly it is appellant who have on their own opted for option provided under Rule 6(3)(ii). The meaning of the option as argued by the Ld. Sr. Counsel is that option of right of choosing, something that may be or is chosen, choice, the act of choosing. From the said meaning of the term op .....

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the vehicle amounting to. ₹ 494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount wh .....

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ption provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. 5.5 As discussed above and in the facts of the case that actual Cenvat credit attributed to the exempted services used towards sale of the bought out cars in terms of Rule 6(3A) comes to ₹ 4,06,785/- where as adjudicating authority demanded an amount of ₹ 24,71,93,529/-. In our view, any amount, over and above ₹ 4,06,785/- is not the part of the Cenv .....

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the present case i.e. Rule 6(3) (i) (ii) (3A) has not been considered in the relied upon judgments, therefore the same are not applicable. As regard the other judgments, all these judgments having different facts and dealing with other provisions such as SSI exemption, exemption notification, etc., which are not identical to the fact of the present case, Moreover, in the present case the substantive provisions under Rule 6(3)(ii) and sub rule (3A) i.e. payment of equivalent to the Cenvat credit, .....

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sel on the issue whether the interest earned by the bank on loans and advances, whether it is exempted service or taxable service, I read Board Circular DOF No.334/1/2012/TRU, dated 16 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 o .....

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ector, provisions are available to reverse credit up to 50% in Rule 6(3D). It is being proposed to change this formula to actual basis, the value of service being net interest earned less interest paid on deposits, subject to a minimum of 50% of interest paid on deposits. For the non-financial sector it is being proposed that they may reverse credits on gross interest basis. From the above clarification and I also read amendment Notification No.11/2012-S.T., dated 17-3-2012, interest, prior to 1 .....

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ersal of interest. In the present case the disputed value is of interest and Cenvat credit up to 50% of credit was required to be reversed. However the appellant admittedly paid the entire Service Tax credit availed by them during the 2008-09 along with 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 .....

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ertake to pay proportionate credit attributable to the exempted service. Therefore in my considered view the appellant, since paid entire Service Tax along with interest under Rule 6(3)(ii), appellant could not be asked to pay any further additional amount. I also find that there were nationwide cases against many assessees 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 .....

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the present case appellant not only paid the amount required under the retrospective amendment but they paid entire Cenvat credit and also paid 24% interest. As regard the procedure prescribed under retrospective amendment provisions, I am of the view that substantial requirement of the amendment is that assessee should pay an amount of Cenvat credit attributable to the exempted services along with 24% interest. Procedure such an application to the Commissioner, is only for the purpose of intima .....

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