TMI Blog2022 (2) TMI 729X X X X Extracts X X X X X X X X Extracts X X X X ..... it be compelled to follow any of the options? - HELD THAT:- A plain reading of the Rule does not show so. An illustration will make the position clear. Colleges select students and grant them admission to various courses. The selection will be subject to conditions such as, produce all the original certificates for verification, pay the fee by a certain date, etc. If the fee is not paid by that date, the college may give the student the option to pay the fee by a further date with late fee. In such a case, the student has an option of not producing his certificates and not paying the fee and not taking the admission at all. He also has the option of producing his certificates and paying the fee in time and taking the admission - Taking admission or fulfilling the pre-requisites for admission are not his legal duties. By contrast, one who manufactures excisable goods or provides taxable services has legal obligations such as taking registration, paying duty/tax and filing returns and failure to discharge any of these legal duties entails penalties. There is no Rule under which a manufacturer can be compelled to follow any of the options of Rule 6.The SCNs in these appeals were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee and against the appellant Revenue. The demands in the show cause notices under Rule 14 of the Cenvat Credit Rules, 2004 of an amount equal to 10% of the value of exempted goods Rule 6 (3) are not sustainable in law at all and, therefore, none of the demands could have been confirmed as the lack any legal basis. It is also found that the Commissioner has not exceeded the scope of the remand order of this Tribunal in the first round in examining if the respondent assessee has fulfilled the requirements of Rule 6(2) of the CCR, 2004 as the remand order left the issue open and has not given any finding on it. It is also found that in these matters, the respondent had maintained separate accounts in the most practical way possible by taking only proportionate amount of Cenvat credit to the extent of 85% which accounts for the proportion of dutiable goods manufactured by them and, therefore, the respondent assessee has met with the requirements of Rule 6(2). Appeal dismissed - decided against Revenue. - EXCISE APPEAL NO. 75222 OF 2017 - FINAL ORDER NO. 75056-75060/2022 - Dated:- 2-2-2022 - EXCISE APPEAL NO. 75222 OF 2017 WITH EXCISE CROSS OBJECTION NO. 75545 OF 2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N- ORIGINAL NO. DATE Commodity (Exempted products cleared) PERIOD INVOLVED AMOUNT INVOLVED (IN Rs.) 1. E/75222/2017 (Second round) 39-46/ Commissioner/CE/ Haldia/Denovo- Adjn./2016 dated 21.10.2016 (Earlier CESTAT Order No. A-268- 268/Kol/2012 dated 30.04.2012 LPG (Domestic) SKO (Domestic) FO, SRN April 2005 to September 2007 and June 2008 to February 2010 ₹ 112.32 crore 2. E/75502/2017 53/Commissioner/CE /Haldia/Adjn./2016 dated 15.12.2016 LPG (Domestic) SKO (Domestic) January 2011 to September 2011 ₹ 50.17 crore 3. E/75503/2017 52/Commissioner/CE /Haldia/Adjn./2016 dated 15.12.2016 LPG (Domestic) SKO (Domestic) March 2010 to December 2010 ₹ 35.78 crore 4. E/75539/2017 (Second round) 51/Commissioner/CE /Haldia/Denovo- Adjn./2016 dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 2010, the learned Commissioner could not have gone into any other provisions of law and the matter should have been decided accordingly. Since the respondent has not fulfilled the conditions of Finance Act, 2010, they are not entitled to its benefit and, therefore, the Commissioner should have confirmed the demand as per the show cause notice. 6. The submission of the respondent is that the Commissioner was not barred by the Tribunal from looking into any legal provisions and the Commissioner has correctly looked into the relevant legal provisions and dropped the demand. Appeal No. E/75502 of 2017 and E/75503 of 2017 7. Commissioner has dropped the demand observing as follows :- Respondent has submitted the Chartered Accountant s certificate for the financial year 2010-2011 and 2011-2012 and also made calculations after the end of financial year and has taken credit only proportionately and, therefore, there is sufficient compliance of maintenance of separate accounts as per Rule 6(2). 8. The appeal by the Revenue is on the ground that the Respondent could not produce supporting documents as per Rule 6(2) of CCR for maintenance of separate accounts for dutiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the remand? c) Has the respondent fulfilled its obligations under Rule 6(2) of the CCR by taking only 85% of the credit on the common input services? d) Is the demand under Rule 14 invoking extended period of limitation in the SCN sustainable? e) Is a penalty imposable under Rule 15 of the CCR, 2004 ? 13. The respondent manufactures dutiable as well as exempted goods and avails Cenvat credit including on common input services. It is the case of the respondent that they have availed Cenvat credit only to the extent of 85% of the common input services and the proportionate value of the goods which were exempted was always well below 15%.Therefore, no Cenvat credit has been availed on the exempted goods and services. The case of the Revenue, on the other hand is that the respondent who availed Cenvat credit was supposed to fulfill its obligations under Rule 6 of CCR. Rule 6(1) mandates that no Cenvat credit is admissible on inputs or input services used in manufacture of exempted goods. Rule 6(2) mentions that if the manufacturer produces both dutiable and exempted goods it has to maintain separate accounts for receipt, consumption and disposal of the input and input s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit and use it to pay duty on the goods cleared on the same day although the duty paid inputs may be used for manufacture much later. This entitlement to take and use CENVAT credit is subject to the CENVAT Credit Rules. 16. The Cenvat Credit Rules 2004 were framed by the Central Government under Section 37 of the Central Excise Act and Section 94 of Chapter V of the Finance Act, 1994, superseding the earlier Cenvat Credit Rules, 2002 (which dealt with Cenvat credit only for manufacture) and Service Tax Credit Rules, 2004 (which dealt with only credit for service providers). The Cenvat Credit Rules, 2004 integrated the two sets of Rules and had provided for credit of excise duty paid on inputs and service tax paid on input services used in or in relation to manufacture of dutiable final products or provision of taxable services. It has been the principle of these rules as well as the erstwhile Modvat Credit provisions under the Central Excise Rules, that credit shall be allowed only on inputs which go into manufacture of dutiable goods. No credit shall be allowed in respect of inputs which go into manufacture of exempted goods. 17. However, there are always inputs which go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to ten per cent of value of the exempted goods and the provider of output service shall pay an amount equal to eight per cent 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 goods or provision of exempted service. (3A) For dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for the whole financial year in the following manner, namely :- (i) The amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H; (ii) The amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; (iii) The amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i) Where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent per annum from the due date till the date of payment. Explanation I Value for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under Section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under Section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder. Explanation II The amount mentioned in sub- rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of receipt of the communication from the Commissioner in this regard. (4) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 10th day of September, 2004 and ending with the 31st day of March, 2008, relating to the provisions as amended by sub-section (1), shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times. (5) For the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, retrospectively, at all material times. Explanation. - For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this section not come into force. 21. The case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cates and paying the fee late along with the late fee. If he doesn t follow any of the available options, he loses his admission. However, the college cannot compel him to follow any of the options. The college cannot extract the fee from him or compel him to produce his certificates. Taking admission or fulfilling the pre-requisites for admission are not his legal duties. By contrast, one who manufactures excisable goods or provides taxable services has legal obligations such as taking registration, paying duty/tax and filing returns and failure to discharge any of these legal duties entails penalties. 24. The obligations in Rule 6 of CCR are not legal duties cast upon the manufacturer like the charging section which can be enforced but are in the nature of conditions subject to which only the manufacturer can avail CENVAT credit. Since Rule 6 provides various alternatives, which one to follow is up to the manufacturer. If none of the options are followed it would amount to not fulfilling the obligations under Rule 6 which disentitles one to the CENVAT credit. If the CENVAT Credit has been taken wrongly in violation of the Rules including Rule 6, such wrongly availed CENVAT cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain reading of Rule 14 shows that it does not empower the Revenue to compel the manufacturer to maintain separate accounts or to pay an amount equal to 10% of the value of the exempted goods. Therefore, any demand of an amount under Rule 6(3) is per se, without any authority of law and there is no Rule under which such an amount can be demanded . This issue was clarified by the Hon ble High Court of Telangana in the case of Tiara Advertising versus Union of India [ 2019 (30) G.S.T.L. 474 (Telangana) ] . The relevant paragraphs of the judgment of the Hon ble High Court of Telangana in the case of Tiara Advertising were as follows:- 14. Further, we may reiterate that Rule 6(3) of the Cenvat Credit Rules, 2004, merely offers options to an output service provider who does not maintain separate accounts in relation to receipt, consumption and inventory of inputs/input services used for provision of output services which are chargeable to duty/tax as well as exempted services. If such options are not exercised by the service provider, the provision does not contemplate that the Service Tax authorities can choose one of the options on behalf of the service provider. As rightly poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion with respect to the case and remanded the matters as it was brought to the attention of the Tribunal that retrospective amendment has been made by Finance Act, 2010. We do not find that Tribunal has either restricted the discretion of the Adjudicating Authority to deciding the matter only in the light of the amendment nor has it made any determination in respect of the un-amended provisions. All the remands were effectively open remands for the Adjudicating Authority to decide as a retrospective amendment was made by Finance Act, 2010. We, therefore, find no force in this argument of the Revenue that the Commissioner could not have decided the matters as per Rule 6(2) which was in existence prior to 2010. We, therefore, find that there was no restriction in the remand orders on the learned Commissioner deciding the matter in terms of Rule 6(2) of Cenvat Credit Rules, 2004. We answer question (b) in paragraph 12 above in favour of the Respondent and against the Revenue. 27. As far as the maintenance of separate accounts of receipt, consumption and disposal of the inputs/input services under Rule 6(2) is concerned, we find that this rule does not require the assessee to eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hold that the respondent had sufficiently met with the requirements of maintaining separate accounts under Rule 6(2) and the Commissioner has correctly dropped all the demands. We, therefore, answer question (c) in paragraph 12 above in favour of the Respondent assessee and against the appellant Revenue. 29. To sum up, we find that the demands in the show cause notices under Rule 14 of the Cenvat Credit Rules, 2004 of an amount equal to 10% of the value of exempted goods Rule 6 (3) are not sustainable in law at all and, therefore, none of the demands could have been confirmed as the lack any legal basis. We also find that the Commissioner has not exceeded the scope of the remand order of this Tribunal in the first round in examining if the respondent assessee has fulfilled the requirements of Rule 6(2) of the CCR, 2004 as the remand order left the issue open and has not given any finding on it. We also find that in these matters, the respondent had maintained separate accounts in the most practical way possible by taking only proportionate amount of Cenvat credit to the extent of 85% which accounts for the proportion of dutiable goods manufactured by them and, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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