2019 (3) TMI 784 - AT - Central Excise

CENVAT Credit - common input services used in manufacture of dutiable as well as exempt goods - non-maintenance of separate records - Rule 6(3A) of the CCR - for the purpose of calculating the Cenvat credit for reversal in terms of Rule 6(3A) as per of formula given therein, whether the total Cenvat credit means it is including the Cenvat credit of input services exclusively used for dutiable product should be taken or total Cenvat credit of only common input service should be taken? - interpretation of statute. Held that - From the reading of Rule 6(1), it is clear that only in respect of input or input service used in exempted goods are not allowed. That means input or input service used in taxable service/dutiable goods, Cenvat credit is allowed. Sub-rule (2) of Rule 6 is only as an option that if any input or input services used in exempted goods, credit should not be allowed and only with this intention some mechanisms for expunging Cenvat credit attributed only to the exempted goods are provided. As per clause (b) (ii) (iv), it is clearly provided that entire credit in respect of receipt and use of inputs/ input service is allowed when such input and input service is used in dutiable final products and taxable service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. The Revenue is only interpreting the term total Cenvat credit provided under the formula. If the whole Rule 6(1)(2)(3) is read harmoniously and conjointly, it is clear that Total Cenvat Credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/ input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004. When anomaly was noticed, the Government has substituted the sub-rule (3A). The legislators very consciously substituted the Rule with intention to give a clarificatory nature to the provision of sub-rule (3A) so as to make it applicable retrospectively. It was all along not the intention of the Government to deny Cenvat credit on the input/ input service even though used in the dutiable goods. Keeping the said view in mind, the substitution in sub Rule (3A) of Rule 6 was made. Therefore, the substituted provision of sub-Rule (3A) shall have retrospective effect being clarificatory. This, for the purpose of calculation of Cenvat credit reversal, in the formula, total Cenvat credit shall mean credit of only common input service and not of input service exclusively used for the manufacture of dutiable product on which the Cenvat credit is eligible to the respondent in its entirety. Jurisdiction - GST regime - all the units within that State are covered under one registration or not? - Held that - The refund claims, even though pertaining to different units, the common jurisdiction lies where the assessee has registration for their principal business location. Therefore, the appellant have rightly filed the appeal before the Commissioner (Appeals) Rajkot who has the correct jurisdiction over the principal business location of the assessee. Appeal disposed off.

Summary

Issues Involved:
1. Jurisdiction of the Commissioner (Appeals) Rajkot.
2. Interpretation of "total Cenvat credit" under Rule 6(3A) of the Cenvat Credit Rules.
3. Retrospective applicability of the amendment to Rule 6(3A) by Notification No. 13/2016-CE.

Detailed Analysis:

1. Jurisdiction of the Commissioner (Appeals) Rajkot:
The Revenue contended that the Commissioner (Appeals) Rajkot had no jurisdiction over appeals related to the Dahej unit, which falls under the jurisdiction of the Commissioner (Appeals) Vadodara. However, the respondent argued that post-GST regime, centralized registration for all units within a state is maintained. The Tribunal agreed with the respondent, citing a Board Circular No. 1056/05/2017-CX dated 29.06.2017, which clarifies that in the GST regime, centralized registration for principal states applies, and thus, the Commissioner (Appeals) Rajkot had jurisdiction over the principal business location of the assessee. Consequently, the jurisdictional objection raised by the Revenue was dismissed.

2. Interpretation of "total Cenvat credit" under Rule 6(3A) of the Cenvat Credit Rules:
The primary dispute was whether "total Cenvat credit" in Rule 6(3A) includes only common input services or also input services used exclusively for dutiable goods. The respondent argued that "total Cenvat credit" should refer only to common input services, as including input services used exclusively for dutiable goods would unjustly disallow credit that is otherwise fully eligible. The Tribunal supported this interpretation, stating that if the Revenue's interpretation were accepted, it would lead to the disallowance of credit on input services used in dutiable goods, which is not intended by the Cenvat Credit Rules. The Tribunal emphasized a harmonious and conjoint reading of Rule 6(1), (2), and (3), concluding that "total Cenvat credit" under Rule 6(3A) pertains only to common input services.

3. Retrospective applicability of the amendment to Rule 6(3A) by Notification No. 13/2016-CE:
The respondent argued that the amendment to Rule 6(3A) by Notification No. 13/2016-CE, which clarified the calculation of "total Cenvat credit," should apply retrospectively as it was curative and intended to remove doubts. The Tribunal agreed, referencing the Supreme Court's judgment in the case of GOI vs. Indian Tobacco Association, which held that a substitution in law, intended to correct an obvious mistake, should have retrospective effect. The Tribunal concluded that the amended Rule 6(3A) should apply retrospectively, meaning the "total Cenvat credit" for reversal calculation includes only common input services, not those used exclusively for dutiable goods.

Conclusion:
The Tribunal upheld the order of the Commissioner (Appeals), dismissing the Revenue's appeals and stay applications. It confirmed that the Commissioner (Appeals) Rajkot had the correct jurisdiction and that the "total Cenvat credit" under Rule 6(3A) should be interpreted to include only common input services. The amendment to Rule 6(3A) by Notification No. 13/2016-CE was deemed to have retrospective effect. The Tribunal also noted and corrected a clerical error in the appeal numbers recorded by the registry.