2014 (1) TMI 56 - AT - Central Excise

Reversal of credit to be made No separate accounts maintained for taxable as well as exempted goods or exempted services - Waiver of Pre-deposit Held that - As per Rule 6(3) the applicant has to opt for Rule 6(3)(i) or Rule 6(3A) - If they have opted to pay 5% value of the exempted goods as per Rule 6(3)(i), they cannot take option separately for exempted services as per Rule 6(3A) the applicants have failed to make a prima case for waiver of amount - the value prescribed as per Rule 6(3) of CENVAT Credit Rules, 2004 is sale price less cost price of goods which is 5% of amount roughly the applicant has already paid Rs. 95,77,184 - the applicants is directed to make a further deposit of Rupees two crores fifty lakhs as pre-deposit upon such submission rest of the duty to be stayed till the disposal partial stay granted.

Summary

Issues:
1. Whether the applicants are required to reverse a percentage of the value of exempted goods/services under Rule 6(3)(i) of CENVAT Credit Rules, 2004.
2. Whether the applicants correctly followed the procedure under Rule 6(3A) for exempted services.
3. Whether the applicants are liable to pay the demanded amount by the revenue as per the impugned order.

Analysis:
1. The applicants, manufacturers of goods falling under Chapter 84 of Central Excise Tariff Act, 1985, also provided taxable services. The revenue initiated proceedings against them, demanding the reversal of 5% value of exempted services provided during the impugned period, amounting to Rs. 11,56,09,971. The applicants maintained separate accounts for manufacturing and service activities but not for taxable and exempted goods/services. The revenue contended that the applicants must reverse a percentage of the exempted goods/services under Rule 6(3)(i) of CENVAT Credit Rules, 2004.

2. The applicants argued that they followed the procedure under Rule 6(3) of the CENVAT Credit Rules, 2004 by reversing 5% value of exempted goods and Rs. 95,77,184 for exempted services under sub-rule 3A of Rule 6(3). They informed the revenue about following Rule 6(3A) for exempted services and believed they were not liable to pay the demanded amount. However, the revenue insisted that under Rule 6(3)(i), the applicants were required to pay a percentage of the value of both exempted goods and services.

3. The Tribunal agreed with the revenue's interpretation, stating that the applicants had to choose between Rule 6(3)(i) or Rule 6(3A) for exempted goods and services. Since the applicants opted to pay 5% value of exempted goods under Rule 6(3)(i), they could not separately opt for exempted services under Rule 6(3A). The Tribunal found no grounds for waiving the demanded amount and directed the applicants to make a further deposit of Rs. 2,50,00,000 within eight weeks to stay the balance amount of duty, interest, and penalty during the appeal process.

This judgment clarifies the application of Rule 6(3) of the CENVAT Credit Rules, 2004 concerning the reversal of a percentage of the value of exempted goods/services and emphasizes the importance of following the correct procedure to avoid liabilities imposed by the revenue authorities.