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2021 (2) TMI 948 - AT - Central ExciseCENVAT Credit - trading activities - non-maintenance of separate records for taxable as well as exempt activities - Rule 6(3A) of CENVAT Credit Rules, 2004 - Interpretation of the term CENVAT Credit taken on input services during the financial year appearing in clause ( c) (iii) of sub-Rule 3A of Rule 6 of CENVAT Credit Rules, 2004 as they were prior to amendment on March 01, 2016 - HELD THAT - The appellants have been from time to time submitting intimation under Rule 6(3A) of CENVAT Credit Rules, 2004 showing full calculation of the manner in which they have arrived at the reversal of CENVAT Credit. In these circumstances, it is apparent that there was no suppression or mis-declaration on the part of the appellant and, therefore, the extended period of limitation could not have been invoked. It is also seen that with effect from March 01, 2016, the law has been amended clearly specifying that reversal of CENVAT Credit only on common inputs service is required. While clarifying the said issue, at the time of issue of said amendment, the Government of India vide DOF No. 334/8/2016-TRU dated February 29, 2016 clarified that Rule 6 of Cenvat Credit Rules which provides for reversal of credit in respect of inputs and input services used in manufacture of exempted goods or for provision of exempted services, is being redrafted with the objective of simplifying and rationalizing the same without altering the established principles of reversal of such credit. Thus, it is apparent that the amendment made is of clarificatory nature and the principles of reversal of credit remains the same. In the instant case, it is seen that Rule 6 of CENVAT Credit Rules, 2004 deals solely with the situation of CENVAT Credit resulting from exempted services and exempted products. The rule itself is clearly designed to deny partial credit of CENVAT credit taken on inputs/input services used in exempted goods and services. The CENVAT credit of other kind has no relevance in this rule. In these circumstances, it is obvious that reference to CENVAT Credit in the said Rule would be reference to CENVAT Credit on common input services which are used for exempted products and services as well as for dutiable products and services. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Interpretation of the term "CENVAT Credit taken on input services during the financial year" in Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004. 2. Applicability of the amendment to Rule 6(3A) by Notification No. 13/2016-CE (NT) dated March 01, 2016. 3. Invocation of the extended period of limitation for demand of reversal of CENVAT Credit. Issue-wise Detailed Analysis: 1. Interpretation of the term "CENVAT Credit taken on input services during the financial year": The primary issue in this appeal was the interpretation of the term "CENVAT Credit taken on input services during the financial year" under Rule 6(3A)(c)(iii) of the CENVAT Credit Rules, 2004. The appellant argued that the term "P" in the formula should be understood as the service tax attributable only to the common services used for both taxable and exempted activities. The Revenue, however, contended that "P" should encompass the total service tax credit taken by the appellant, not just the common input services. The Tribunal referenced the decision in Reliance Industries Limited, where it was clarified that "total CENVAT credit" for the purpose of the formula under Rule 6(3A) should be interpreted as the total CENVAT credit of common input services, excluding the credit on input/input services exclusively used for the manufacture of dutiable goods. This interpretation was upheld by the Hon'ble High Court of Gujarat, which ruled that no substantial question of law arose from the Tribunal's decision. 2. Applicability of the amendment to Rule 6(3A) by Notification No. 13/2016-CE (NT) dated March 01, 2016: The Tribunal examined whether the amendment to Rule 6(3A) by Notification No. 13/2016-CE (NT) dated March 01, 2016, had retrospective effect. The appellant argued that the amendment was clarificatory in nature and intended to simplify and rationalize the rule without altering the established principles of reversal of credit. The Tribunal agreed, noting that the amendment was meant to clarify the existing rule and thus should be applied retrospectively. The Tribunal also cited the clarification issued by the Government of India, which stated that the rule had been redrafted to simplify and rationalize it without altering the established principles of reversal of credit. This supported the appellant's contention that only a part of the common CENVAT Credit needed to be reversed, not the full CENVAT Credit. 3. Invocation of the extended period of limitation for demand of reversal of CENVAT Credit: The Tribunal found that the appellant had been periodically submitting detailed calculations of the reversal of CENVAT Credit to the Revenue, indicating transparency and lack of intent to evade or suppress information. Consequently, the Tribunal ruled that the extended period of limitation could not be invoked in this case. The Tribunal's decision was influenced by the fact that similar relief had been granted in the appellant's own case by the CESTAT, Chennai, and in other cases such as E-Connect Solutions (P) Ltd. and Reliance Industries Ltd. Conclusion: The Tribunal set aside the impugned order and allowed the appeal, concluding that the term "CENVAT Credit taken on input services during the financial year" should be interpreted as the credit attributable to common input services used for both taxable and exempted activities. The amendment to Rule 6(3A) by Notification No. 13/2016-CE (NT) was deemed clarificatory and thus applicable retrospectively. The invocation of the extended period of limitation was found to be unjustified due to the appellant's consistent transparency with the Revenue.
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