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TMI Blog2024 (3) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 confirmed an amount of Rs.59,62,525/- for the period from July 2014 to June 2017 along with interest and equivalent amount of penalty has been imposed under Section 11AC of the Central Excise Act 1944. 3. The Learned counsel at the outset submitted that the audit was conducted in the month of July 2018 and based on the audit observations they were asked to pay Rs.59,62,527/- but the appellant resisting the demand vide letter dated 14.5.2018 paid only an amount of Rs.2,20,720/- as per the methodology prescribed under Rule 6(3A) of the CCR, 2004. Later, show cause notice dated 4.10.2018 was issued demanding an amount of Rs.59,62,525/- in terms of Rule 14 of the CCR, 2004 read with Section 11A of the Central Excise Act, 1944 which culminated into the impugned order which imposed penalty along with duty and interest. It is submitted that the order is contrary to the relevant provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice 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 Rules 1994. Admittedly, the goods that were being traded were not eligible for the benefit of CENVAT credit which is not disputed. 5.2 The relevant Sections of the CCR, 2004 are reproduced below: CENVAT CREDIT RULES, 2004 [Notification No. 23/2004-C.E. (N.T.), dated 10-9-2004 as amended] 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 as is used in or in relation to the manufacture of exempted goods or for provision of exempted services or input service as is 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 and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 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) 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 number of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services and description of such exempted goods removed and such exempted services provided; (iv) description of inputs and input service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able 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 provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit. (vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of fifteen per cent. per annum; (c) the manufacturer or the provider of output service shall determine the amount of CENVAT credit attributable to exempted goods removed and provision of exempted services for the whole of financial year, out of the total credit denoted as T (Annual) taken during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 than the later; (g) the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f), the following particulars, namely :- (i) details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b); (ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year, determined as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) in case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent. of the cost of goods sold, whichever is more; (d) in case of trading of securities, shall be the difference between the sale price and the purchase price of the securities traded or one per cent. of the purchase price of the securities traded, whichever is more; (e) shall not include the value of services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount :] [Provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 exempt therefrom. Be it noted that output services relating to advertising space booked by the petitioner in print media is exempted under Section 65(105)(zzzm) of the Finance Act, 1994, which defines 'taxable service' to mean any service provided to any person by any other person, in relation to sale of space or time for advertisement but does not include sale of space or advertisement in print media. The Cenvat Credit availed by the petitioner which is in controversy accounts for a sum of Rs. 17,15,489/- only. 7. Rule 6 of the Cenvat Credit Rules, 2004 deals with the obligations of a provider of taxable and exempted services. Rule 6(1) states that Cenvat Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied 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 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 pointed out by Sri S. Ravi, Learned Senior Counsel, if the petitioner did not abide by the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, it was open to the authorities to reject its claim as regards the disputed Cenvat Credit of Rs. 17,15,489/-. 15. We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly, Rule 14 of the Cenvat Credit Rules, 2004 empowered the authorities to recover such credit which had been taken or utilised wrongly alo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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