TMI Blog2024 (3) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... factures and clears simultaneously dutiable and exempted goods, various alternatives were provided to the taxpayer and having chosen a particular option, they cannot avail any other option simultaneously and the amended provisions are also not being considered - In the present case, the appellant does not manufacture consciously dutiable and exempted products but at times, trades in goods that were found to be excess and therefore, he was liable to reverse the CENVAT credit availed on the traded goods which are nothing but exempted products. Since the audit officers have noticed this irregularity, the appellant having accepted it, they have reversed the proportionate credit as laid down by Rule 6(3A) of the CCR, 2004 which is one of the options provided to the tax payer. Therefore, the question of denying this option to the appellant is not acceptable. The Hon ble High Court of Telangana Hyderabad in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [ 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] had observed We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly, Rule 14 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UDICIAL) AND MRS. R. BHAGYA DEVI, MEMBER (TECHNICAL) Mr. B. Venugopal, Advocate for the Appellant Mr. H. Jayathirtha (AR) for the Respondent ORDER This is an appeal filed by the appellant, M/s. Suvikram Plastex Private Limited against the Order-in-Appeal No.104/2020-21-CT dated 10.12.2020 passed by the Commissioner of Central Tax (Appeals-II), Bangalore. 2. Briefly the facts of the case are that the appellant are manufacturers of excisable goods such as HDPE/PP, Woven Sacks, etc. The audit team on verification of the financial accounts of the appellant observed that they were not only manufacturing excisable goods but they were also undertaking purchase and sale of goods i.e., trading of goods. During the course of audit, the Revenue officers observed that the appellant had availed common input services without maintaining separate inventory for the taxable and exempted services in terms of rule 6(2) of the Cenvat Credit Rules (CCR), 2004. Since common input services have been used, an amount of 6% or 7% of the value of the exempted services in terms of Rule 6(3)(i) of the CCR 2004 is required to be paid by the appellant and accordingly, the authorities below have demanded and conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not maintained separate inventory for taxable and non-taxable services and relying on the decision of the Tribunal in the case of Sify Technologies Ltd. Versus Commissioner of GST and Central Excise: Final Order No.40084/2023 dated 27.02.2023. It is submitted that the appellant cannot avail options under Rule 6(2) and 6(3) simultaneously. 5. Heard both sides and perused the records. The period of dispute is July 2014 to June 2017 and the only question to be decided is when separate accounts are not being maintained for dutiable and exempted services, whether proportionate reversal of credit is sufficient to comply with the relevant CCR, 2004. 5.1 As per Rule 2(e) of the Cenvat Credit Rules (CCR) 2004 amended w.e.f 01.07.2012 Exempted Service means : (i) taxable service which is exempt from the whole of service tax leviable thereon; or (ii) service, on which no service tax is leviable under Section 66B of the Finance Act; or (iii) taxable service whose part of value is exempted on the condition that no credit of inputs and input services used for providing such taxable service shall be taken but shall not include service which is exported in terms of rule 6A of the Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (i) shall be seven 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 (i) shall be an amount equal to two per cent. of value of the exempted services. Explanation 1 . - 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 2 . - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services. Explanation 3. - For the purposes of this sub-rule and sub-rule (3A),- (a) non-exempted goods removed means the final products excluding exempted goods manufactured and cleared upto the place of removal; (b) exempted goods removed means the exempted goods manufactured and cleared upto the place of removal; (c) non-exempted services means the output services excluding exempted services.] [(3A) For determination of amount required to be paid unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attribution. (iv) the amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, - D = (E/F) x C; where E is the sum total of (a) value of exempted services provided; and (b) value of exempted goods removed, during the preceding financial year; where F is the sum total of - (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed, and (d) value of exempted goods removed, during the preceding financial year : Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted as G, where,- G = C - D; Explanation .- For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Annual ineligible credit and Annual ineligible common credit and the aggregate amount of ineligible credit and ineligible common credit for the period of whole year, namely, [{A(Annual) + D(Annual)} {(A+D) aggregated for the whole year)}], where the former of the two amounts is greater than the later; (e) where the amount under clause (d) is not paid by the 30th June of the succeeding financial year, the manufacturer of goods or the provider of output service, shall, in addition to the amount of credit so paid under clause (d), be liable to pay on such amount an interest at the rate of fifteen per cent. per annum, from the 30th June of the succeeding financial year till the date of payment of such amount; (f) the manufacturer or the provider of output service, shall at the end of the financial year, take credit of amount equal to difference between the total of the amount of the aggregate of ineligible credit and ineligible common credit paid during the whole year and the total of the amount of annual ineligible credit and annual ineligible common credit, namely, [{(A+D) aggregated for the whole year)} {A(Annual) + D(Annual)}], where the former of the two amounts is greater t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules (1), (2) and (3), shall have the option to pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.] [(3C) * * * * ] (3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken. [ Explanation I . - Value for the purpose of sub-rules (3) and (3A), (a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made thereunder or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made thereunder; (b) in the case of a taxable service, when the option available under sub-rules (7), (7A), (7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of service tax under section 66B of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternatives were provided to the taxpayer and having chosen a particular option, they cannot avail any other option simultaneously and the amended provisions are also not being considered. In the present case, the appellant does not manufacture consciously dutiable and exempted products but at times, trades in goods that were found to be excess and therefore, he was liable to reverse the CENVAT credit availed on the traded goods which are nothing but exempted products. Since the audit officers have noticed this irregularity, the appellant having accepted it, they have reversed the proportionate credit as laid down by Rule 6(3A) of the CCR, 2004 which is one of the options provided to the tax payer. Therefore, the question of denying this option to the appellant is not acceptable. The Hon ble High Court of Telangana Hyderabad in the case of Tiara Advertising vs. UOI (supra) had observed as follows: 6 . At the outset, we may note that the Cenvat Credit availed by the petitioner during the relevant tax period was to the tune of Rs. 1,41,51,903/-. This included input tax credit availed upon output services which were subject to Service Tax and also some output services which were exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, the second respondent issued show cause notice dated 19-4-2016 to the petitioner proposing to choose the option under the aforestated Rule 6(3)(i) on its behalf and calling upon it to explain as to why it should not be directed to pay an amount of 5%, upto 31-3-2012, and 6%, from 1-4-2012, of the value of the exempted services, aggregating to Rs. 3,52,65,241/-. In its reply dated 16-5-2016, the petitioner contended that it was wholly unreasonable on the part of the authorities to expect it to pay over Rs. 3.50 Crore when the total Cenvat Credit availed by it was less than Rs. 1.50 Crore and the actual dispute boiled down to a mere Rs. 17,15,489/-. It relied on case law to support its contention that such an unreasonable result could not be allowed to follow by application of the law. 10-13 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 servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was introduced in the year 2016 from 01.04.2016, and the Rule reads as follows: [(3AA) Where a manufacturer or a provider of output service has failed to exercise the option under sub-rule (3) and follow the procedure provided under sub-rule (3A), the Central Excise Officer competent to adjudicate a case based on amount of CENVAT credit involved, may allow such manufacturer or provider of output service to follow the procedure and pay the amount referred to in clause (ii) of sub-rule (3), calculated for each of the months, mutatis-mutandis in terms of clause (c) of sub-rule (3A), with interest calculated at the rate of fifteen per cent. per annum from the due date for payment of amount for each of the month, till the date of payment thereof. 5.5 From the above, it is very clear that even if the manufacturer or a provider of service had failed to exercise the option under subrule (3) will be allowed to pay proportionate credit along with the interest at the rate of 15% per annum from the due date for payment of amount till the date of payment. However, there is nothing on record to show that the appellant has reversed the entire proportionate credit along with interest, therefore t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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