2017 (11) TMI 606 - AT - Central Excise

CENVAT credit - the gist of the contention in the appeal is that for applying the formula in Rule 6 (3A) (c) (iii) the department has taken the total credit availed on input services, whereas, only the total common credit should have been taken - The department was of the view that in the formula, the total credit availed on input services has to be applied and not the total common credit on input services. Held that - The appellant is using input services exclusively for dutiable goods and are availing entire credit on such input services. They are also availing certain other input services which are used commonly for manufacture of dutiable goods and trading (exempted service). They are not maintaining separate accounts. The first contention of the appellant is that Rule 6 provides for the procedure to avail credit when common inputs/input services are used and therefore this entire Rule i.e., Rule 6, has to be interpreted so as to pertain to areas where common credit is availed. I am not able to agree with this argument of the Ld.Counsel for appellant. The Rule provides for obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. Therefore a manufacturer who manufactures both dutiable goods and exempted goods and provider who provides taxable and exempted service would come within the ambit of the said Rule. The appellant has sought to be outside the purview of Rule (6) for the input services used exclusively for dutiable goods, and then seeks to apply the formula prescribed in sub-rule (3A) in respect of common input services used for dutiable and exempted service (trading). In sub clause (iii) of Rule 6 (3A) (c), it is stated that P denotes total Cenvat credit taken on input services during the financial year. There is no ambiguity in the words or in the formula prescribed therein. The rule uses the words total credit on input services and the same cannot be stretched to read as total common credit on input services. Appeal dismissed - decided against appellant-assessee.

Summary

Issues:
1. Interpretation of Rule 6 (3A) (c) (iii) of Cenvat Credit Rules, 2004 regarding the calculation of Cenvat credit on common input services for dutiable and exempted goods.

Detailed Analysis:

E/41619/2017:
The appellant, engaged in manufacturing aerated water, beverages, and fruit pulp drinks, availed Cenvat credit on inputs/input services without reversing the correct amount as required under Rule 6 (3A) of Cenvat Credit Rules, 2004 due to using common input services for both manufacturing and trading activities. The dispute arose when the department claimed the appellant had not reversed the correct amount and issued a Show Cause Notice for recovery. The appellant argued that only the total common credit should be considered for applying the formula in Rule 6 (3A) (c) (iii), not the total credit availed on input services. However, the Tribunal held that the formula clearly stated that P denotes total Cenvat credit taken on input services during the financial year, rejecting the appellant's argument and ruling in favor of the Revenue.

E/41533/2017:
In this case, the appellant, involved in manufacturing vehicle parts and trading various items, availed Cenvat credit on common input services but reversed a proportionate credit attributed to trading goods following the formula under Rule 6 (3A) of Cenvat Credit Rules. The department issued a Show Cause Notice for recovery, and penalties were imposed by the original authority. The appellant contended that the total common credit on input services should be considered for calculation, not the total credit availed. The Tribunal reiterated that P in the formula denotes total Cenvat credit taken on input services, emphasizing that no ambiguity existed in the rule's wording. The Tribunal dismissed the appeals, upholding the demand of the Revenue.

In both cases, the Tribunal emphasized that the Rule clearly specified the calculation method for Cenvat credit on common input services and rejected the appellants' arguments regarding the interpretation of the formula. The judgments were delivered in favor of the Revenue, affirming the demand for recovery and penalties imposed.