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TMI Blog2020 (7) TMI 698X X X X Extracts X X X X X X X X Extracts X X X X ..... put materials and avails various input services and avails and utilises cenvat credit of duty or service tax paid thereon in terms of the Cenvat Credit Rules. Since the said duty paid input materials and input services are used both in or in relation to the manufacture of dutiable and exempted goods respectively, the appellant is required to follow the provisions of Rule 6 of the Cenvat Credit Rules. 3. Rule 6(3) was substituted on March 1, 2008 by Notification No. 10/2008-CE(NT) with effect from April 1, 2008. A new sub-rule (3A) was also inserted in Rule 6 by the said Notification, which was made effective on and from April 1, 2008. In terms of the amended provisions, a manufacturer of goods or provider of output services who did not maintain separate accounts as provided for under Rule 6(2) of the Cenvat Credit Rules was given two options. In terms of Rule 6(3)(i) the manufacturer could make payment of an amount equal to 10% of the value of the exempted goods. However, in terms of Rule 6(3)(ii) of the Cenvat Credit Rules the manufacturer of goods could opt for paying an amount equivalent to the cenvat credit attributable to input and input services used in or in relation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules and effected payments in terms of Rule 6(3)(ii) of the Cenvat Credit Rules, for which it opted by the letter dated May 29, 2008, with effect from April 1, 2008. 7. On 29.09.2009 the Commissioner issued a show cause notice alleging that the appellant had contravened the provisions of Rule 6(3) of the Cenvat Credit Rules with intent to evade payment of a sum of Rs. 4,35,71,478/- during the period from September 2008 to March 2009, since the appellant having exercised option in terms of Rule 6(3)(i) of the Cenvat Credit Rules had subsequently, during the same financial year, altered the said option and followed the option in terms of Rule 6(3)(ii) read with Rule 3(A) of the Cenvat Credit Rules which was not permissible in terms of the Explanation -I of Rule 6(3) of the Cenvat Credit Rules. The show cause notice proposed recovery of the said amount of Rs. 4,35,71,478/- from the appellant under the provisions of Rule 14 of the Cenvat Credit Rules read with Section 11A of the Act, along with interest in terms of Rule 14 of the Cenvat Credit Rules read with Section 11AB of the Act. It also proposed imposition of penalties upon the appellant under Rule 15(2) of the Cenvat Credit Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce exercised cannot be withdrawn during the remaining part of the said financial year. (d) Though there is no such specific provision regarding intimation to the Range Superintendent or other Central Excise authorities regarding exercise of option in terms of Rule 6(3)(i) of the Cenvat Credit Rules, a harmonious construction of the relevant provisions of Rule 6(3) and 6(3A) of the Cenvat Credit Rules makes it clear that exercise of option in terms of Rule 6(3)(i) has also to be specifically intimated to the jurisdictional Central Excise authority and in the absence thereof it cannot be said that a manufacturer has chosen to exercise the option in terms of Rule 6(3)(i) of the Cenvat Credit Rules. (e) In the impugned order it has been held that since the appellant had paid 10% on clearances of the subject exempted goods during the months April, 2008 to August, 2008 it had to be taken that it had exercised to avail the option in terms of Rule 6(3)(i) of the Cenvat Credit Rules and hence in terms of Explanation-I thereof the appellant could not withdraw therefrom and adopt the option provided under Rule 6(3)(ii) of the Cenvat Credit Rules during the said period. This finding has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:- (i) the manufacturer of goods shall pay an amount equal to ten percent of value of the exempted goods and the provider of output service shall pay an amount equal to eight percent 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 subject to the conditions and procedure specified in sub-rule (3A). 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. Explanation II.- For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rintendent in writing vide letter dated 14-3-2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of cenvat credit, which they have made alongwith interest is in accordance with Rule 6(3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004, in accordance to which, the appellant is supposed to pay an amount equivalent to cenvat credit on input service attributed to the exempted service in terms of Rule 6(3A). In the present case, the appellant has availed cenvat credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to cenvat credit which is attributed to the input service used for exempted service, i.e., sale of car. In our view, three options have been provided under Rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 there is no such time limit provided for exercising such option in the rules but it is a common sense that intention of any option should expressed before exercising the option, however the delay can be taken as procedural lapse. We also note that trading of goods was considered as exempted service from 2011 only, thus it was initial period. We are also of the view that there is no condition provided in the rule that if a particular option, out of three options are not opted, then only option 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to the assessee. In any case, at no stretch of imagination can it be said that on failure to intimate the department, Rule 6(3)(i) would automatically come into application. 7. In support of their arguments, the appellants have placed reliance on the judgment passed by Co-ordinate Bench of CESTAT in Mercedes Benz India (P) Ltd. Vs. CCE, Pune-1 [2015-TIOL-1550-CESTAT-MUM = 2015 (40) S.T.R. 381 (Tribunal)]. The issue under consideration is squarely covered by the said judgment In Rathi Daga Vs. CCE, Nashik [2015 (38) S.T.R. 213 (Tri-Mum)] and Foods, Fats & Fertilisers Ltd. Vs. CCE, Guntur [2009 (247) E.L.T. 209 (Tri-Bang) = 2011 (22) S.T.R. 484 (Tribunal)], it has been held that the condition in Rule 6(3A) to intimate the department is only a procedural one and that such procedural lapse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying duty on the goods cleared during the opening days of the Financial Year was only erring in favour of the revenue and not foregoing an exemption. Such caution in an assessee cannot be turned against him...................................." 15. The correspondence on record of the appellant with Range Superintendent exchanged during the period May 2008 to June 2008, clearly establishes that the appellant had never exercised at any point of time during the period 2008-09 the option in terms of Rule 6(3)(i) of the Cenvat Credit Rules prior to May 2008. The Commissioner has therefore erred in holding that it is on record that the appellant had exercised the option under Rule 6(3)(i) of the Cenvat Credit Rules in the instant case. There is no document disclosed either in the show cause notice or in the impugned order which evidences exercising of such option by the appellant. Exercising an option is a positive act and cannot be inferred as has been sought to be done by the Commissioner and submitted by the Ld. Special Counsel. 16. Hence, following the principle laid down in the abovestated orders of the Tribunal it is conclusive that there has been due compliance by the appellant o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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