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TMI Blog2023 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts of the appellant and scrutiny of the invoices, it was noticed by the department that the appellant had short paid the amount of cenvat credit that has to be reversed by them under Rule 6 (3) of Cenvat Credit Rules, 2004 in respect of exempted services. On perusal of the records produced before the audit, it was noticed that the appellant availed cenvat credit on common input services. They had opted to exercise the option of paying the amount as determined under sub-rule (3A) of Rule 6 of CCR 2004. While doing so, they had not adopted the formula correctly and this non-adoption of correct formula resulted in short reversal of cenvat credit as required under Rule 6 (3) of CCR 2004. Thus the appellant was liable to reverse an amount of Rs.6,63,93,170/- for the period 2012-13 to 2014-15. Show cause notice dt. 28.07.2016 was issued proposing to demand the amount which ought to have been reversed by them on proper application of the formula along with interest and also for imposing penalties. Secondly, it was also noticed that the appellant had short-paid service tax under 'Business Auxiliary Service (BAS)' for the services rendered to NTPC. The notice proposed to demand the sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment : Provided that if any duty of excise is paid on the exempted goods, the same shall he reduced from the amount payable under clause (i) : Provided further that if any part of the value of a taxable, service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be six per cent. of the value so exempted : Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (z) shall be an amount equal to 2 per cent. of value of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable services does not apply. The said rule is pari materia to Rule (6) of the CCR 2004. 8. The Board has also issued a clarification vide its circular No.868/6/2008 dated 09.05.2008 while introducing Rule 6 (3A) of CCR. Sl.No.1 of the said circular clarifies that for the purpose of calculation of amount under formula given in Rule 6 (3A), the total cenvat credit taken on inputs and input services does not include excise duty paid on inputs or service tax paid on inputs services which are used exclusively for the manufacture of exempted goods or provisions of exempted services. The Board's circulars are binding upon the department as held by the Hon'ble Supreme Court in the case of British Machinery Supplies Co. v. UOI - 1991 (86) ELT 449 (SC). 9. With regard to the second issue of confirmation of demand under BAS, the Ld. Counsel submitted that appellant is only contesting the penalty imposed in this regard. Appellant had paid the service tax when pointed out by the department. Therefore, penalty imposed is required to be set aside. Ld. Counsel prayed that the appeals may be allowed. 10. Ld. A.R Shri M. Ambe appeared for the Department and supported the findings in the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service/dutiable goods. Cenvat credit is allowed. Sub-rule (2) of Rule 6 is only used as an option that if any input or input services used in exempted goods, credit should not be allowed and only with this intention some mechanisms for expunging Cenvat credit attributed only to the exempted goods are provided. As per clause (b)(ii) & (iv), it is clearly provided that entire credit in respect of receipt and use of the inputs/input service is allowed when such input and input service is used in dutiable final products and taxable service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. The Revenue is only interpreting the term "otal Cenvat credit" provided under the formula. If the whole Rule 6(1)(2)(3) is read harmoniously and conjointly, it is clear that "Total Cenvat Credit" for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointly, it is clear that "Total Cenvat Credit" for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004. ... ... ... 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 sub-rule (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." 14. The said decision was appealed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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