TMI Blog2024 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... convenience of the taxpayer to ensure that credit is taken only on the dutiable products/services. In the present case, the Commissioner while allowing payment of proportionate credit as per Rule 6(3A), with regard to interest holds that interest is not liable to be paid since sufficient balance was available in their account. The Commissioner has failed to notice that Rule 6(3A) is only an option given to the appellant allowing reversal of credit at a later date only if it is paid along with interest. The reliance placed by the Commissioner on the decision of the Hon ble High court of Karnataka in the case of CCE, ST LTU Bangalore vs Bill force Ltd. [ 2011 (4) TMI 969 - KARNATAKA HIGH COURT] is misplaced since the facts of that case was excess availment of credit which was unutilized and reversed. The present case is clearly distinguishable as it is allowing the option of proportionate reversal of credit provided the reversal happens along with interest. The Commissioner s order with regard to confirmation of service tax demand of Rs.1,14,64,277/- upheld - Revenue s appeal with regard to demand of interest is upheld - interest is to be paid on the above demand of Rs.1,14,64,277/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1550-CESTAT MUMBAI Cranes and Structural Engineers Vs CCE Bangalore-I 2016 VIL 664 CESTAT Bangalore CE Aster Private Limited vs. CC CE, Hyderabad-III: 2016-TIOL-1035-CESTAT HYDERABAD. 2.1 Regarding interest, the Commissioner has held that since they had sufficient balance in their cenvat credit account throughout the Financial Year 2011-12 and 2012-13 and since the respondent had reversed the proportionate credit immediately after audit observation much before the issue of show-cause notice, the reversal of such credit would amount to not taking the credit and therefore, dropped the interest following the decisions of the Hon ble High court of the Karnataka in the case of CCE, ST LTU Bangalore vs Bill force Ltd.: 2012 (279) ELT 209. Aggrieved against this impugned order, the Revenue is in appeal. 3. The Authorized Representative for the Revenue referring to the grounds of appeal submits that as per the amended Rule 6(3)(1) of the CCR, 2004 effective from 01.04.2011 credit shall not be allowed to be used in the exempted services. Rule 6(3) of the 2004 gives an option to the tax payer not to maintain separate account provided: (i) Pay an amount equal to 6% /7% of value of the exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed payment attracts interest and as per Rule 6(3A) all reversals should attract interest. 4. The respondent on the other hand submitted that it is a settled law that reversal of proportional credit was sufficient for having utilized the input services for trading purpose and relies on the decision rendered in the case of Tiara Advertising vs. Union of India: 2019 (30) GSTL 474 (Telangana). And also relies on the amendments to the law in the Finance Act, 2016, wherein the CCR, 2014 were amended to improve credit flow, reduce the compliance burden and associated litigations, particularly those relating to apportionment of credit between exempted and non-exempted products/services. He also submits that since sufficient credit balance was there in their books of accounts the question of interest did not arise and the appeal filed by the department on the ground that it is only an amount is also not sustainable. 5. Heard both sides. 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]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and description of such exempted goods removed and such exempted services provided; iv. description of inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services and description of such non-exempted goods removed and non-exempted services provided; V. CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely: - ---- --- (d) the manufacturer or the provider of output service shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount 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, [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Emphasis supplied (3AB) Assessee who has opted to pay an amount under clause (ii) or clause (iii) of sub-rule (3) in the financial year 2015-16, shall pay the amount along with interest or take credit for the said financial year in terms of clauses (c), (d), (e), (f), (g), (h) or (i) of sub-rule (3A), as they prevail on the day of publication of this notification and for this purpose these provisions shall be deemed to be in existence till the 30th June, 2016.] Explanation III. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (3), (3A) [and (3B)], it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. The above Rules very clearly establish that the taxpayer has been given an option to reverse the credit along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utput services. It also did not choose to opt for one of the procedures stipulated in Rule 6(3) set out supra. The petitioner however availed and utilised Cenvat Credit on such inputs/input services which were common to both taxable and exempted output services and the same amounted to Rs. 17,15,489/-. 9. It may be noted that there is no controversy with regard to the entitlement of the petitioner to avail Cenvat Credit but for this disputed amount of Rs. 17,15,489/- out of the total extent of Rs. 1,41,51,903/-. While so, the second respondent issued show cause notice dated 19-4-2016 to the petitioner proposing to choose the option under the afore stated 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not have to spend time on carrying out the exercise. This amendment i.e. procedure for apportionment under subrule (3A) was facilitative and procedural. The entitlement to credit otherwise is in rule 3 of the CENVAT credit Rules. In the present case the period of dispute is after the introduction of Rule 3(A) in the CENVAT Credit Rule 2004 which was introduced from 01.04.2016, and Rule 3 provided an option to pay an amount as determined under subrule (3A) which allowed the appellant to reverse the proportional credit. Subrule (3AA) 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 fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill force Ltd. (supra) is misplaced since the facts of that case was excess availment of credit which was unutilized and reversed. The present case is clearly distinguishable as it is allowing the option of proportionate reversal of credit provided the reversal happens along with interest. To avail the option the appellant has to necessarily pay the interest as specified therein. The Supreme Court of India in the case of Pratibha Processors Versus Union of India 1996 (88) E.L.T. 12 (S.C.) decided on 11-10-1996 observed: 13. In fiscal Statutes, the import of the words tax , interest , penalty , etc. are well known. They are different concepts. Tax is the amount payable as a result of the charging provision. It is a compulsory exaction of money by a public authority for public purposes, the payment of which is enforced by law. Penalty is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of the particular statute. Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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