2020 (3) TMI 307 - AT - Central Excise

CENVAT Credit - inputs or input services attributable to both exempted goods/exempted services and dutiable goods and taxable services - whether the total credit that should be taken for calculation in terms of Cenvat Credit Rule 6 (3A) should be restricted to only common inputs or common input services only? HELD THAT - The appellant s case is covered by the decision of the Ahmedabad Tribunal in the case of Commissioner of Central Excise ST, Rajkot Vs. Reliance Industries Ltd. 2019 (3) TMI 784 - CESTAT AHMEDABAD wherein it had been held that 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. Revenue was unable to distinguish the order/decision relied on by the Ld. Advocate and nor did he file any contrary order/decision in his support - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Calculation of Cenvat credit to be reversed for inputs or input services attributable to both exempted and dutiable goods/services.
2. Interpretation of "total Cenvat credit" under Rule 6 (3A) of the Cenvat Credit Rules, 2004.
3. Applicability of the Ahmedabad Tribunal's decision in the case of Commissioner of Central Excise & ST, Rajkot Vs. Reliance Industries Ltd.
4. Retrospective application of the amendment to Rule 6 (3A) by Notification No. 13/2016-C.E. (N.T.), dated 1-3-2016.

Issue-wise Detailed Analysis:

1. Calculation of Cenvat Credit to be Reversed:
The primary issue to be decided was whether the calculation of Cenvat credit to be reversed, in cases where inputs or input services are attributable to both exempted and dutiable goods/services, should be restricted to only common inputs or common input services. The appellant argued that the total credit for calculation in terms of Rule 6 (3A) should be limited to common inputs or input services only, rather than including all inputs or input services.

2. Interpretation of "Total Cenvat Credit" under Rule 6 (3A):
The appellant contended that Rule 6 (3A) should be interpreted to mean that "total Cenvat credit" refers only to the total credit of common input services and does not include the credit on inputs/input services exclusively used for the manufacture of dutiable goods. The Revenue's interpretation was that "total Cenvat credit" should include all input services, which would disallow credit even for those used exclusively in the manufacture of dutiable goods. The appellant's interpretation was supported by the Ahmedabad Tribunal's decision in the case of Commissioner of Central Excise & ST, Rajkot Vs. Reliance Industries Ltd., which held that the term "total Cenvat credit" should be restricted to common input services.

3. Applicability of the Ahmedabad Tribunal's Decision:
The appellant relied on the decision of the Ahmedabad Tribunal in the case of Commissioner of Central Excise & ST, Rajkot Vs. Reliance Industries Ltd., which clarified that the total Cenvat credit for the purpose of Rule 6 (3A) should only include common input services and not those used exclusively for dutiable goods. The Tribunal in the present case found this decision to be relevant and applicable, as it addressed the same issue of interpreting "total Cenvat credit" under Rule 6 (3A).

4. Retrospective Application of the Amendment to Rule 6 (3A):
The Tribunal noted that an amendment was made to Rule 6 (3A) by Notification No. 13/2016-C.E. (N.T.), dated 1-3-2016, which clarified the calculation of Cenvat credit. The amended rule specified that the credit attributable to exempted goods/services should be calculated separately and should not include credit for inputs/input services used exclusively for dutiable goods/services. The Tribunal held that this amendment was clarificatory in nature and should be applied retrospectively, as it was intended to address the same issue of interpreting "total Cenvat credit."

Conclusion:
After considering the arguments and the relevant legal provisions, the Tribunal found that the issue was no longer res integra and was covered by the decision of the Ahmedabad Tribunal. The Tribunal held that the impugned order, to the extent it was contested, was liable to be set aside. Consequently, the appeal was allowed with consequential relief, as per law. The operative part of the order was pronounced in the open court.