2017 (12) TMI 389 - AT - Service Tax

CENVAT credit - exempted as well as dutiable services - non-maintenance of separate records - Rule 6(3)(i) of CCR Rule 2004 - non-intimation of option under 6(3A)(a) at the beginning of the year - Held that - the issue has been settled in favor of the assessee in the case of Aster Pvt. Ltd. Vs. CCE, Hyderabad-III 2016 (6) TMI 866 - CESTAT HYDERABAD , where it was held that the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of appellant's appeal by Commissioner (A) - Demand of 8% of value of exempted services - Non-maintenance of separate accounts for input services - Exercise of option under Rule 6(3A) of CCR Rule 2004 - Procedural violation - Invocation of extended period of limitation.

Analysis:
The appeal challenged the rejection of the appellant's appeal by the Commissioner (A), who demanded 8% of the value of exempted services due to the non-maintenance of separate accounts for input services. The appellant provided taxable and exempted services but failed to maintain separate accounts for input services used for each category, leading to the demand. The appellant contended that they exercised the option under Rule 6(3A) of CCR Rule 2004 by determining and remitting the amount attributable to exempted services along with interest. The appellant argued that the Commissioner (A) wrongly observed the date of intimation, emphasizing that the option was exercised within the stipulated time frame. The appellant relied on precedents to support their argument that Rule 6(3A) is procedural and a violation does not deprive the assessee of substantive benefits. The appellant further contended that a procedural violation does not warrant the invocation of the extended period of limitation unless malafide intent is proven.

The appellant's consultant argued that the impugned order demanding 8% of the value of exempted services was based on a misinterpretation of the timing of the option exercise under Rule 6(3A) of CCR Rule 2004. The consultant highlighted that the appellant had determined and remitted the amount attributable to exempted services within the required timeframe, citing specific instances where procedural lapses were condoned by the tribunals. The consultant emphasized that the procedural nature of Rule 6(3A) should not result in the denial of benefits to the assessee. The consultant also pointed out that the delay in intimation should not lead to an unsustainable demand for the specified percentage of the value of exempted goods.

Upon considering the submissions of both parties and the cited decisions, the judicial member found that the issue was settled in favor of the appellant. Citing precedents, the member emphasized that Rule 6(3A) is procedural and does not automatically trigger the application of Rule 6(3)(i) in case of a failure to intimate the option. The member noted that the delay in filing the intimation of the option was viewed as a procedural lapse that could be condoned. Ultimately, the appeal was allowed, setting aside the impugned order and providing consequential relief to the appellant based on the established legal principles and precedents.

In conclusion, the judgment addressed the issues related to the demand of 8% of the value of exempted services, the exercise of the option under Rule 6(3A) of CCR Rule 2004, and the implications of procedural violations on the invocation of the extended period of limitation. The analysis highlighted the importance of timely compliance with procedural requirements and the applicability of established legal principles in resolving disputes related to tax liabilities on exempted services.