TMI Blog2018 (9) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (3). It is clear that Rule 6 (1) is a substantive plenary provision - Hon'ble Supreme Court in CCE Vs Gujarat Narmada Fertilizers Co. Ltd. [2009 (8) TMI 15 - SUPREME COURT] held that sub rule (1) of Rule 6 is plenary. It restates a principle, namely, that CENVAT credit of duty paid on inputs used in the manufacture of exempted final product is not allowable. This principle is inbuilt in the very structure of the CENVAT scheme. The mechanism adopted by the appellant for following both sub-rule (2) and sub-rule (3) in respect of different common input services defeats the very restrictions placed under different conditions of sub-rule (3). As seen in the present case itself that appellant invoked clause (c) of sub-rule (3) and submitted that they were not hit by restriction of 20% in utilizing credit on tax liability of final output services, on the ground that total credit availed under sub-rule (3) falls short of the same. We note this claim is misleading and ignoring the fact that they have maintained separate accounts and availed full credit in respect of common input services attributable to taxable output services in terms of sub-rule (2). The appellants should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued the Show Cause Notice, was never brought to the notice of the Bench. Surprisingly, the last page of the Show Cause Notice copy available in the appeal file is also found missing. In any case, as per the directions of the Hon ble Bench, the case was re-heard on 06.08.2018 as well as on 09.08.2018. 1.4. The appeal is against order dt.30.09.2009 of Commissioner, LTU, Chennai. This order is passed on a remand direction by the Tribunal vide Final Order No.1086/2008 dt.29.09.2008. 2. The brief facts of the case are that the appellants are registered with the department for discharging service tax under different categories like online information and data base access / retrieval, internet cafe, leased circuit services, franchise service etc. They were also rendering certain services on which service tax is not payable. The appellants were availing CENVAT Credit of tax paid on various input services used by them, in terms of CENVAT Credit Rules, 2004. The period involved in the present appeal proceedings is 1.4.2005 to 31.3.2008. 3. The appellants availed CENVAT Credit in the following manner: (a) CENVAT Credit attributable exclusively to taxable services availed fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the appellant that they have not availed any input service tax credit when such were utilized exclusively for providing exempted services. He recorded that the appellants have satisfied the condition under Rule 6(1). (b) The original authority also held that in respect of input services used for both non-taxable and taxable services they have maintained separate accounts and taken credit only in respect of input services relatable to taxable services. It is recorded that they have fulfilled condition of Rule 6(2) properly in this regard. (c) The original authority also held that the appellants have availed credit on capital goods properly and (d) the input service tax credit in respect of listed services in terms of Rule 6 (5) was found to be properly availed by the appellant. 6. The original authority examined in detail the dispute regarding implication of Rule 6(3), the manner of accounting and credit availment by the appellant. In order to appreciate the facts as examined by the original authority along with his reasoning, it is necessary to reproduce the relevant portion of the impugned order which is as under : 22. Next, I find that the taxpayer have ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at they have availed service tax on these common input services (excluding those mentioned under Rule 6(5)) and utilised the same to the extent of 20% of service tax payable on output taxable services. They have not availed these common services on apportioned basis also corresponding to the SBUs rendering taxable and non-taxable services. Nor have they separately shown expenses incurred on behalf of the SBU rendering exempted services, by the SBUs rendering common services. In the absence of such bifurcation among the common input services, the eligibility even to the availment of such credit on common input services, does not arise, leave alone, its utilisation within the 20% limit. Further, 20% limit on service tax payable was prescribed only in case where no separate accounts are maintained and all input services are common, which cannot be made applicable to a situation where both separate accounts are maintained and common services are incurred. If credit is given for exclusive taxable services under Rul3 6(2) and also for common services within the 20% limit, the entire credit availed on common input services in the present case, are well within the 20% limit, which would ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d credit taken exclusively relating to taxable services have also been held to be eligible in the paras discussed above. They have also relied on the decision in the case of M/s. Royal Sundaram Alliance Insurance Company, wherein, the Commissioner dropped the demand vide OIO no. LTUC/28/2009-C dt.3.2.2009 having been satisfied with the separate books of accounts maintained by the assessee similar to them. This case is also not discussed here as the separate books of accounts maintained by the taxpayer in respect of taxable and exempt services have been accepted and credit taken exclusively relating to taxable services allowed. It would be worthwhile to point out here that in the said case, the assessee had taken only proportionate credit of common input services relating to taxable services on the basis of premium from taxable and exempted services and their exempted services were only 0.1% of total services. However, in the present case, the income from taxable and exempt services or their ratio to the total are not known and the taxpayer has not taken proportionate credit relating to taxable services, but taken the entire credit on common input services and utilised the same with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (c) of Rule 6(3) had no impact as 20% tax liability on the output service was higher than the total credit availed under Rule 6(3) on common input services. 7.3 The Ld. Counsel submitted that w.e.f. 01.04.2008, Rule 6(3) of the C.C.R. Rules, 2004 has been amended and the restriction of 20% of the amount of Service Tax payable on taxable service has been done away with. Further, he submitted that the Board vide their Circular dt. 21.11.2008 has clarified that any CENVAT Credit accumulated as on 01.04.2008, because of the restriction of 20% up to that date, should be allowed to be utilized after 01.04.2008. 7.4 In this connection, he also relied on the Tribunal decisions in the case of Mumbai International Airport Pvt. Ltd. Vs. Commissioner of C. Ex., Mumbai-V 2014 (33) S.T.R. 308 (Tri. Mum.) and DHL Logistics Pvt. Ltd. Vs. Commissioner of Central Excise, Thane-II 2015 (38) S.T.R. 620 (Tri. Mum.). He submitted that even if CENVAT Credit has been wrongly taken in the period prior to 01.04.2008, on account of the 20% restriction, Revenue can only demand interest on the wrongly availed credit from the date of utilization till 01.04.2008. He also justified availing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CCR which are as under : Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. 6. (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule (2): Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer 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 quantity of input meant for use in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on this only to state that sub-rule (1) should not be read in isolation. In the present case, we are faced with a situation where the appellants have several common inputs/ input services. For some of them, they followed sub-rule (2) and maintained separate accounts and for some others they have followed Rule 6 (3). Rule 6 (3) allowed credit on common input services notwithstanding the provisions of Rule 6 (1) or Rule 6 (2). The appellant's claim is that Rule 6 (2) and Rule 6 (3) can operate concurrently. We are not in agreement with such a proposition. Both sub-rule (2) and (3) of Rule 6 talk about manufacturer or provider of output services . The said sub-rules do not talk about the service wise maintenance of accounts. It is with reference to manufacturer or provider of output service . As already noted, sub-rule (1) absolutely prohibits availing CENVAT credit on input service which is used in the manufacture of exempted goods or exempted services except in the circumstances mentioned in sub- rule (2). In other words, it is very clear that plenary provision of sub-rule (1) is giving exception to a situation envisaged in sub-rule (2). Sub-rule (2) is for a 'm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case itself that appellant invoked clause (c) of sub-rule (3) and submitted that they were not hit by restriction of 20% in utilizing credit on tax liability of final output services, on the ground that total credit availed under sub-rule (3) falls short of the same. We note this claim is misleading and ignoring the fact that they have maintained separate accounts and availed full credit in respect of common input services attributable to taxable output services in terms of sub-rule (2). In other words, it would lead to a situation where the assessee can choose to maintain separate account in respect of common input services under sub-rule (2) and, at the same time, follow sub-rule (3) in respect of a few of the common input services so that the bar of 20% utilisation of credit on final tax liability can be avoided. We find the present situation is against the basic principle of CCR. We are of the considered opinion that in respect of common input services for which the appellant is entitled to credit they have an option either to follow sub-rule (2) or sub-rule (3). Following both selectively in respect of selective common input services is against the basic principle and the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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