2018 (11) TMI 1148 – CESTAT CHENNAI – TMI – CENVAT credit – common input services used to render taxable as well as exempted services – Rule 6(3) (c) of the Cenvat Credit Rules, 2004 – invocation of extended period.
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Extended period of limitation – contention of petitioner is that SCN dated 06.01.2011 will become time barred for the period prior to 2009, since an earlier show cause notice dated 12.10.2006 had already been issued to SFL on identical issue – Held that:- Since SCL and SFL remained as separate entities prior to their merger, we are of the view that invoking the extended period of limitation in the second show cause notice dated 06.01.2011 will not be against the order of the Supreme Court in the Nizam Sugar case. [2006 (4) TMI 127 – SUPREME COURT OF INDIA], where it was held that extended period cannot be invoked in a second show cause notice if, for identical facts for an earlier period, a show cause notice has already been issued.
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The appellant will not be en
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case of appellant is that the appellant is entitled to the full cenvat credit in respect of input services specified in Rule 6(5) of the Cenvat Credit Rules – Held that:- This sub rule permits full credit of 17 services specified therein – there is no reason for denying the above credit. It is also relevant to record that in the earlier proceeding culminating in the Order In Original dated 30.09.2009, the full credit of services under Rule 6(5) was in fact allowed by the adjudicating authority.
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Appeal allowed in part. – ST/MISC[CT]/41712/2017 & Appeal No. ST/103/2012-SMC – Final Order No. 42420/2018 – Dated:- 12-9-2018 – Mr. V. Padmanabhan, Member (Technical) And Ms. Sulekha Beevi, Member (Judicial) Sh. Raghavan Ramabadran, Advocate for the appellant Sh. K. Veerabhadra Reddy, JC AR for the Respondent ORDER Per: V. Padmanabhan 1. The present appeal is against the Order-in-Original No. 374/2011 dated 17.11.2011. The period of dispute is June 2007 to March 2010. The impugned order d
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axable and exempted services, they availed these credits in full and claimed that these credits did not exceed 20% of the output service tax liability. As per the provision of Rule 6(3) (c) of the Cenvat Credit Rules, 2004 there was a restriction that the credit on common input services should not exceed 20% of the output service tax liability. This restriction was done away w.e.f. 01.04.2008 when Rule 6(3) was amended and Rule 6(3A) was included providing for reversal on proportionate basis. After issue of show cause notice dated 06.01.2011, the adjudicating authority passed the impugned order dated 17.11.2011 in which the entire cenvat credit availed on common input services was ordered to be reversed. Aggrieved by the decision, the present has been filed. 3. With the above background heard Sh Raghavan Ramabadran, ld. Advocate for the appellant as well Sh. K. Veerabhadra Reddy, JC (AR) for the department. 4. The arguments advanced by the ld. Advocate are summarized below:- a. An iden
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e appellant was required to submit their option for reversal of credit on proportionate basis, in terms of Sub Rule 3A. Even though such intimation was filed by the appellant on a subsequent date, they have adhered to the proportionate reversal. This satisfies the provisions of Rule 6 (3) and consequently the Revenue is not justified, to order reversal of the entire credit availed on common input services. c. The ld. Advocate further reiterated the submissions made in Appeal ST/00028/2010 to the effect that only Rule 6 (3)(c) is applicable in respect of common inputs/ input services and that Rule 6(2) and Rule 6(3) can operate concurrently. d. The ld. Advocate also argued that out of the total demand confirmed amounting to ₹ 1,56,36,250/- an amount or ₹ 1,01,12,140/- pertains to the credit of input services specified in Rules 6(5) of CCR, 2004 for which cenvat credit in full is eligible to be availed. He submitted that this amount cannot be ordered for reversal. e. The ld.
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the view that Rules 6(2) and 6(3) cannot operate concurrently. (c) Even after the amendment carried out w.e.f 01.04.2008 in Rule 6 (3), there is no material change in respect of the compliance aspect of manufacturer/ provider of output service with reference to common input services. He emphasized that the appellant has chosen the option of maintaing separate account as required under Rule 6(2) and has availed the credit in full in respect of the taxable services and NIL in respect of services exclusively used for exempted services. He submitted that in spite of the amendments carried out on 01.04.2008, the appellant will not be entitled to any credit on common input services. (d) Even though the appellant has carried out proportionate reversal of common input services as per Rule 6(3A), the appellant cannot be allowed to avail the cenvat credit on common input services since they have opted to follow Rule 6(2). 6. Heard both sides and carefully perused the record. 7. For the period up
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er period, a show cause notice has already been issued. 9. The issue in this regard had been discussed elaborately by the adjudicating authority in the impugned order and we reproduce below the said findings with our approval:- 30. As regards suppression, the taxpayer have argued that the ingredients mentioned in proviso to Sec. 73(1) is not present in their case and hence extended period of limitation cannot be invoked for demanding wrongly availed cenvat credit beyond period of one year. Also they have stated that earlier notices had been issued to Sify Technologies on the same issue and the Department was aware of the facts and hence another notice cannot be issued invoking suppression of facts. In this regard, I find that the present notice, eventhough addressed to Sify Technologies, pertains to the wrongly availed excess credit by Sify Communications, which was earlier a separate entity and got merged with Sify Tech only w.e.f. 01.04.2008 and the consolidated returns for both the
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dit on common input service, which they were doing and suppressing the said fact from the Department, which came to light only after verification. Thus the taxpayer cannot escape the proviso to Sec. 73(1), as they have suppressed material facts with an intent to avail excess credit to which they are not eligible. I therefore hold that extended period of limitation under Rule 14 of CCR read with proviso to Sec. 73(1) for demand of excess credit availed has been rightly invoked. Since SCL and SFL remained as separate entities prior to their merger, we are of the view that invoking the extended period of limitation in the second show cause notice dated 06.01.2011 will not be against the order of the Supreme Court in the Nizam Sugar case. 10. On the main issue of common input services for the period upto 01.04.2008, the relevant findings of the Tribunal vide Final Order No. 42327/2018 dated 30.08.2018 are reproduced below. 9. We have heard both the sides and perused appeal records. The fac
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that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails CENVAT credit in respect of any Inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in pro
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merely highlights that principle. Sub-rule (1) covers all inputs, including fuel, whereas silly-rule (2) refers to non-fuel inputs. Sub-rule (2) as well as (3) put in place the mechanism to comply with the mandate of sub-rule (1) in the case of a manufacturer/provider of an output service availing CENVAT Credit, but manufactures/provides output services which are both chargeable to duty as well as exempted. Sub-rule (2) requires the manufacturer/provider of output service to maintain separate accounts for inputs/input services which are used for manufacture of dutiable goods/providing taxable service as well as those which are used towards the exempted goods/services. In terms of the sub-rule (2), the assessee is allowed to take CENVAT Credit only in respect of inputs/input services used towards dutiable goods/services. Sub-rule (3), on the other hand, caters to the circumstances where the manufacturer/service provider does not maintain separate accounts as per sub-rule (2). The proce
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reference to manufacturer or provider of output service . As already noted, sub-rule (1) absolutely prohibits availing CENVAT credit on input service which is used in the manufacture of exempted goods or exempted services except in the circumstances mentioned in sub-rule (2). In other words, it is very clear that plenary provision of sub-rule (1) is giving exception to a situation envisaged in sub-rule (2). Sub-rule (2) is for a manufacturer or provider of output service who shall maintain separate accounts for receipt, consumption and inventory of input and input services meant for use in the manufacture of dutiable final products or in providing output service as well as those exempted. A combined reading of provisions of Rule 6 makes it clear that CENVAT credit shall not be allowed for input services both for exempted as well as taxable output services, maintains separate accounts in respect of consumption of such input services on which credit is availed. 12. Sub-rule (3) of Rule
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sub-rule (3). In other words, it cannot be said that for certain input services, the assessee can maintain separate account under sub-rule (2) and in respect of others, he need not maintain such account and opt for sub-rule (3). In our considered opinion that will defeat the very mandate of the main provision under sub-rule (1). 13. We note that mechanism adopted by the appellant for following both sub-rule (2) and sub-rule (3) in respect of different common input services defeats the very restrictions placed under different conditions of sub-rule (3). As seen in the present case itself that appellant invoked clause (c) of sub-rule (3) and submitted that they were not hit by restriction of 20% in utilizing credit on tax liability of final output services, on the ground that total credit availed under sub-rule (3) falls short of the same. We note this claim is misleading and ignoring the fact that they have maintained separate accounts and availed full credit in respect common input se
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on to deny credit on common input services. While we agree on such legal principle, we note that credit cannot be availed beyond the scope of provision in Rule 6. In the appellant's case credits are availed in terms of provision under sub-rule (2) and sub-rule (3) simultaneously. Hence the question of irregularly availing and disputing the reversal due to lack of legal machinery is not tenable. In other words, the appellants should follow legal provision as per Rule 6. Having not followed, they cannot take a plea that there is no provision to deny credit already availed. When the appellants maintained separate accounts for common input services and availed credits under sub-rule (2) of Rule 6, then there is no question of another option for common input services under sub-rule (3) of Rule 6 11. By following our order (supra) in respect of the appellant we hold that appellant will not be entitled to credit on common input services. Turning to the period post 01.04.2008, we note that
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ively taxable services in full, the appellant has subscribed to sub rule 2. Consequently we are inclined to apply the decision of Tribunal as above even for the period post 01.04.2008, despite the amendment carried out in Rule 6(3) and insertion of sub Rule 3A. 13. The only issue which remains to be addressed before we conclude the matter is in respect of the argument advanced that the appellant is entitled to the full cenvat credit in respect of input services specified in Rule 6(5) of the Cenvat Credit Rules. This sub rule permits full credit of 17 services specified therein. We see no reason for denying the above credit. It is also relevant to record that in the earlier proceeding culminating in the Order In Original dated 30.09.2009, the full credit of services under Rule 6(5) was in fact allowed by the adjudicating authority. 14. In view of the above detailed discussions the appeal of the appellant is decided as follows:- 1 The invoking of extended period in terms of the Rule 14 o
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