2009 (5) TMI 585 - AT - Service Tax

waiver of pre-deposit - Application for stay - No separate accounts are maintained for dutiable or exempted product and services - appellate authority found that the assessee did not reverse the correct amount of Cenvat credit taken on the common input services - Rule 6(3A)(b) and (c) of the Cenvat Credit Rules, 2004 - When the actual figures for the financial year comprising the said month become available, the exact amount of Cenvat credit is calculated on the basis of actuals - eparate accounts in relation to common input services, there was no workable option for them and, in that scenario, there is no point in saying that the assessee had the option of paying 10% of the value of the exempted final product - it has not been shown on behalf of the Revenue that it was possible for the assessee to maintain separate accounts in respect of common input services vis-a-vis dutiable final products and the exempted final product - Decided in favour of the assessee

Issues:
1. Whether the appellants were required to pay duty and penalty for a specific period.
2. Whether the appellants maintained separate accounts for common input services.
3. Whether the demand for payment based on Rule 6(3)(b) of the Cenvat Credit Rules, 2004 is sustainable.
4. Whether the appellants followed the correct procedure for reversing Cenvat credit.
5. Whether the formula under Rule 6(3A)(b)(iii) of the Cenvat Credit Rules, 2004 was applicable.
6. Whether the law required the appellants to do the impossible.
7. Whether waiver of pre-deposit and stay of recovery should be granted.

Analysis:

1. The appellants were required to pay duty and penalty for a specific period, which was contested in the present application seeking waiver of pre-deposit and stay of recovery. The issue revolved around the demand of Rs. 3,96,852/- duty and penalty for the period April 2006 to March 2007.

2. The key contention was whether the appellants maintained separate accounts for common input services. The lower appellate authority demanded payment based on the appellants not maintaining separate accounts for common input services used in manufacturing dutiable and exempted final products.

3. The demand for payment was based on Rule 6(3)(b) of the Cenvat Credit Rules, 2004, which required the appellants to pay 10% of the value of the exempted final product cleared during the specified period. The dispute arose from the calculation of the correct amount of Cenvat credit on common input services.

4. The debate centered on whether the appellants followed the correct procedure for reversing Cenvat credit. The appellants claimed they reversed Cenvat credit on a pro rata basis as maintaining separate accounts was not feasible. However, the Revenue argued that maintaining separate accounts was possible and the appellants chose to reverse credit correctly post-dispute.

5. The applicability of the formula under Rule 6(3A)(b)(iii) of the Cenvat Credit Rules, 2004 was crucial. The rule required provisional calculation of Cenvat credit on common input services based on the preceding financial year, with final adjustment based on actual figures. This procedure was introduced in 2008.

6. The judgment delved into whether the law required the appellants to do the impossible. It emphasized that no law should mandate actions beyond practical feasibility. If maintaining separate accounts was not viable for the appellants, then demanding payment based on such an impossibility was unjustifiable.

7. Ultimately, the tribunal granted waiver of pre-deposit and stay of recovery in respect of the dues adjudged against the appellants. The decision was based on the inability of the Revenue to demonstrate the feasibility of maintaining separate accounts for common input services, leading to a favorable ruling for the appellants.

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