TMI Blog2019 (8) TMI 1874X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire amount proportionate credit along with interest due in respect in respect of the period 01.04.2008 to 31.12.2010 (Rs 1,22,98,068/ +Rs 17,49,730/-) even prior to issuance of show cause notice, there are no merits in the demands made post 1st April 2008 and the same is set aside. For the period prior to 1st April 2008, it is found that as per the law as it existed during the relevant period appellant was required to pay 10% of the value of exempted goods, if he was not in position to maintain separate account in respect of the inputs/ input services used for manufacturing both exempted and dutiable goods. Interpreting the erstwhile rule 57CC of Central Excise Rules, 1944, Hon ble Supreme Court has in case of UNION OF INDIA OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [ 2014 (5) TMI 253 - SUPREME COURT ] held Rule 57CC requires an assessee to maintain separate records for inputs which are used in the manufacture of two or more final products one of which is dutiable and the other is non-dutiable. In that event, Rule 57CC will apply. The benefit of proportionate reversal has been extended from retrospective effect, in cases where common inputs/ input services were use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Rules, 2004 read with Section 11AC of Central Excise Act, 1944 2.1 Appellants are engaged in manufacture of Heat Exchangers, Pressure Vessels and Boilers etc classifiable under Chapter 84 of First Schedule to Central Excise Tariff Act, 1985. They claimed benefit of exemption under Sr No 7, 8,19 and 21 of Notification No 64/1995-CE, in respect of the goods supplied to Department of Space, Government of India and Indian Space Research Organization and Sr No 1 of Notification No 10/1997-CE dated 09.03.1997 in respect of supplies made to Public Funded Research Institutions or Universities. 2.2 Since appellant maintains separate account in respect of the inputs used in the manufacture of exempted goods they do not take any credit of duty paid on such inputs. They have taken credit in respect of various input services as detailed in para 3 of the Show Cause Notice. Since these input services are common for manufacture of both exempted as well as dutiable goods, and they had not opted for the scheme provided by rule 6(3)(ii), they were required to pay the amounts as indicated in table below, attributable to the exempted goods cleared by them Period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Seven Hundred and Thirty only) should not appropriate against the interest payable under (iii). e) penalty of should not be imposed upon them under Section 11AC of Central Excise Act, 1944 read with Rule 15 of the CENVAT Credit Rules, 2004 for contravention of Rule 6(3)(b) of CCR, 2004 prior to 01.04.2008 and Rule 6(3)(i) of CCR, 2004 w.e.f 01.04.2008. 2.3 Show Cause Notice was adjudicated by the Commissioner as per the impugned order referred in para 1, supra. 2.4 Aggrieved appellants are in appeal before Tribunal. 3.1 We have heard Shri V Sridharan, Senior Advocate with Shri Prakash Shah and Shri Prasad Paranjape, Advocates, for the Appellants and Shri Ajay Kumar, Additional Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the Appellant learned Counsels, submitted while reiterating the submissions made in appeal They had vide their letter dated 10.04.2008, 06.04.2009 and 8.04.2010 exercised the option under Rule 6(3)(ii) of the CENVAT Credit Rules, 2004. Thus when they had exercised the option under Rule 6(3)(ii), the demand made under Rule 6(3)(i) cannot be sustained for the period from 01.04.208 onwards. Though they had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onate reversal (Rule 6(3)(ii)). Since appellant had not maintained separate accounts as provide by Rule 6(2), they were required to either make proportionate reversal every month by following the procedure as laid down Rule 6(3A). Appellant having not made provisional reversal every month as required under Rule 6(3A), they were required to pay amount determined at specified % of the exempted clearance as per 6(3)(ii). The contention of the appellants, in respect of applicability of Amendments made by Section 73 of Finance Act, 2010 are misplaced. These amendments were only applicable in respect of the disputes which were pending as on the date of assent. Since there was no dispute, pending in present case on the date of enactment, these provisos will not be applicable. Further the appellants have also not followed the procedure as laid down by the amendments made by section 73. Demand is not barred by limitation, as the appellants had not disclosed about not maintaining the separate accounts for input services used for manufacture dutiable and exempted goods. In fact they were maintaining separate accounts for the inputs. By doing so and also not reversing the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both sides. From the facts and circumstances of the case and arguments put forth by rivals, we find that the issue to be decided by us is whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rule 6(3A) along with interest following the option available under Rule 6(3)(ii). Provisions for payment of 5% of the sale value of exempted goods is provided as one of the option given in Rule 6(3) of CENVAT credit Rules which is reproduced below: RULE 6. Obligation of a manufacturer or producer of final products and a [provider of output service. (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the manufacture of exempted goods or for provision of exempted services, or input service used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subclauses (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 subclauses (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 be 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 percent.] 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 (i) shall be an amount equal to 2 per cent. of value of the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT 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 the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub rule (3) (ii), we find that foremost condition is that the appellant is required to pay an amount as per the formula provided under sub rule (3A) on monthly basis. However, we find that as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 the option as argued by the Ld. Sr. Counsel is that option of right of choosing, something that may be or is chosen, choice, the act of choosing . From the said meaning of the term option', it is clear that it, is the appellant who have liberty to decide which option to be exercised and not the Revenue to decide the same. 5.4 We find that the appellant admittedly paid an amount of Rs. 4,06,785/ plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with subrule (3A) of Rule 6 of CENVAT Credit Rules, therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the present case. Moreover, in the present case the substantive provision sunder Rule 6(3)(ii) and sub-rule (3A) i.e. payment of equivalent to the CENVAT credit, which the appellant have complied with and if at all there is delay, the required interest has also been paid, therefore in the present case, there is no case of non compliance of procedure and condition. Therefore the judgments cited by the Ld. A.R. are not applicable. 4.4 Similar view has been expressed by the CESTAT in following decisions: i. M/s TATA Technologies Ltd. vs Commissioner Central Excise Pune-II [2016-TIOL-272-CESTATMum] ii. Sahyadri Starch Industrial Pvt Ltd vs. Commissioner Central Excise, Kolhapur [2016- TIOL-615-CESTAT-Mum] iii. Aster Pvt Ltd vs. Commissioner Central Excise Hyderabad III [2016-TIOL-1035-CESTAT-Hyd] 4.5 In case of Reliance Life Insurance Co Ltd [2018 (363) ELT 1050 (T-Mum)] CESTAT, Mumbai Bench held as follows: 5. . Before us also it is their submission that they have been given option to reverse the proportionate credit and they cannot be forced to reverse 6% of the value of exempted goods in terms of Rule 6(3) of CCR, 2004. In our considered view the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order. It is also held that the appellant has to follow the consequences of such finding. We note that upon the direction of the impugned order, the respondent did exercise the second option and reversed the credit along with interest. In such factual background, we find that there is no reason to insist that the respondent should necessarily follow the first option of paying 6% of the value of exempted service. We find no merit in the appeal by Revenue. Accordingly, we dismiss the same. 5.1 We are in agreement with the aforesaid order of the Tribunal and the other judgments and hold that the appellant is entitled for reversal of credit attributable to the exempted service and the demand of 6% is not sustainable against them. The appellant has also argued that there reversal of Cenvat credit ought to be computed by taking the entire Cenvat credit of the services of Insurance Auxiliary Service as the same fall in ambit of Rule 6(5) of Cenvat Credit Rules, 2004 in line with Tribunal s decision in case of TATA AIG Life Insurance Company Ltd. reported in 2014-TIOL-487 = 2015 (37) S.T.R. 570 (Tribunal). We find that in terms of Rule 6(5) of CCR, 2004 the credit of tax paid on I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fillers, sulphur, vulcanising agents which are used in production of tyres are indeed common to both dutiable and exempt tyres. Such assessees are mandated to maintain separate records to avoid the duty demand of 8% on exempted tyres. .. 4.8 However in order to mitigate the difficulties faced by the trade by strict application of the said rule, Rule 6 was amended retrospectively by Finance Act, 2010 in following manner: 72. (1) In the CENVAT Credit Rules, 2004, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, as published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 600(E), dated the 10th September, 2004, rule 6 shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Eighth Schedule, on and from and up to the corresponding date specified in column (4) of that Schedule against the rule specified in column (2) of that Schedule. (2) Where a person opts to pay the amount in accordance with the provisions as amended by subsection (1), he shall pay the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 6 of the CENVAT Credit Rules, 2004 as published vide notification number G.S.R. 600(E), dated the 10th September, 2004 [23/2004- CENTRAL EXCISE (N.T.) dated the 10th September 2004]. In the CENVAT Credit Rules, 2004, in rule 6, after sub-rule (6), the following sub-rule shall be inserted, namely: (7) Where a dispute relating to adjustment of credit on inputs used in or in relation to exempted final products relating to the period beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then, notwithstanding anything contained in sub-rules (1) and (2), and clauses (a) and (b) of sub-rule (3), a manufacturer availing CENVAT credit in respect of any inputs or input services and manufacturing final products which are chargeable to duty and also other final products which are exempted goods, may pay an amount equivalent to CENVAT credit attributable to the inputs or input services used in, or in relation to the manufacture of, exempted goods before or after the clearance of such good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e obvious. The assessees have been allowed to proportionately reverse the credit attributable to inputs/ input services used for manufacture of exempted goods, in cases where common inputs/ input services are used or manufacture of both dutiable and exempted goods. We are no in agreement with the submissions made by the learned Authorized Representative, when he states that this amendment is applicable only in case where the show cause notice was issued and was pending on the date of assent by the President. In our view, phrase Where a dispute relating to adjustment of credit on inputs used in or in relation to exempted final products relating to the period beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, is limited to the show case notice issued, but refers to the dispute that is there on the issue during the specified period. The amendment specifically says that the dispute should pending on that date, and the show cause notice. Definitely if the dispute is pending then only show cause notice is issued. In our view the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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