TMI Blog2020 (11) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amendment was also clarified by the Tax Research Unit Circular dated February 29, 2016 to apply retrospectively in as much as the clarification clearly mentions that the provisions of rule 6 providing for reversal of credit in respect of input services used in exempted services, is being redrafted with the objective to simplify and rationalize the same without altering the established principles of reversal of such credit. It has been further clarified at paragraph (iv) of the Circular that the purpose of the rule is to deny credit of such part of the total credit taken, as is attributable to the exempted services and under no circumstances this part can be greater than the whole credit. The confirmation of demand, therefore, cannot be sustained - Appeal allowed - decided in favor of appellant. - Excise Appeal No. 53458 of 2018 - FINAL ORDER NO. 51579/2020 - Dated:- 14-9-2020 - HON BLE MR. JUSTICE DILIP GUPTA, PRESIDENT AND HON BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Sukriti Das, Advocates for the Appellant Shri O.P. Bisht, Authorised Representative for the Department ORDER JUSTICE DILIP GUPTA This appeal seeks the quashing of the order dated J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on contemplated under the proviso to section 73(1) of the Finance Act. 7. The appellant submitted a reply dated January 16, 2017 denying the charges levelled in the show cause notice. However, the Additional Commissioner, by order dated January 30,2017, confirmed the demand raised in the show cause notice with interest and penalty under rule 15(3) of the Rules read with section 78 of the Finance Act. 8. Feeling aggrieved, the appellant filed an appeal before the Commissioner (Appeals). This appeal was dismissed by order dated July 18, 2017. 9. This appeal has, accordingly, been filed to assail the order passed by the Commissioner (Appeals). 10. Shri B.L. Narasimhan, learned counsel appearing for the appellant made the following submissions: (i) The availment of common input service credit and its reversal on proportionate basis has been correctly determined by the appellant under rule 6(3A) of the Rules. The appellant maintained separate records/accounts of input services which were exclusively used for rendering taxable services and thus credit has been availed only to that extent; (ii) For the input services which were utilized by the appellant for providing bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r services and information technology software services. It availed and utilised the CENVAT credit earned on input services for discharging its output tax liability. The appellant is also engaged in trading of goods, which is an exempted service and the appellant claims that it has not availed CENVAT credit on the output services utilised exclusively for trading activity. However, certain input services, on which CENVAT credit was availed by the appellant, were utilised by the appellant for providing both taxable output services and exempted services. 14. The issue that arises for consideration in this appeal is regarding the manner of computation of proportionate reversal of credit determined under rule 6(3A) of the Rules. The contention of the Department is that for the purpose of reversal, the total CENVAT credit taken on input services, including the common input services should be considered while the contention of the appellant is that total CENVAT credit taken on input services should include only common input services and services used in exempted services and not the services used exclusively in rendering taxable output services. 15. In order to appreciate conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services. Explanation III.- No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer 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 Excise giving the following particulars, namely:- (i) name, address and registration No. of the manufacturer of goods or provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that CENVAT credit should be availed only in respect of input services used in rendering taxable service. Rule 6(3) provides an elaborate procedure for reversal of credit on a proportionate basis in respect of those service providers opting not to maintain separate accounts. Rule 6(3A) provides for a procedure for calculating proportionate credit admissible to an assessee. A service provider can avail the entire credit of input services and at the end of every month reverse a provisional amount of credit based on the preceding financial year s turnover for different services, but at the end of the year, the service provider is required to calculate final credit based on the current year s actual turnover figures and make the adjustments. What transpires, therefore, is that in terms of rule 6(3A), a provider of output service can take only proportionate credit that is attributable to the taxable service. 17. The dispute in the appeal is regarding the interpretation of the term total CENVAT credit provided in the formula in rule 6 (3A)(b)(ii). According to the Department, the total CENVAT credit should include even those services used exclusively in taxable services, including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or total Cenvat credit of only common input service should be taken. Before proceeding, it is necessary to read the relevant Rule 6(1)(2)(3) pre and post amendment notification. 10. From the above it can be seen that when anomaly was noticed, the Government has substituted the sub-rule (3A). The legislators very consciously substituted the Rule with intention to give a clarificatory nature to the provision of subrule (3A) so as to make it applicable retrospectively. It was all along not the intention of the Government to deny Cenvat credit on the input/input service even though used in the dutiable goods. Keeping the said view in mind, the substitution in sub Rule (3A) of Rule 6 was made. Therefore, the substituted provision of sub-Rule (3A) shall have retrospective effect being clarificatory. 22. The Commissioner (Appeals) has placed reliance upon an interim order passed by a Tribunal in Thyssenkrupp Industries (I) Pvt. Ltd. Vs. Commissioner of C.Ex., Pune, 2014 (310) ELT 317 for upholding the demand. Only a prima facie case is expressed in an interim order and observations made therein have no precedent value. In fact, as noticed above, the issue is covered by the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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