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2022 (7) TMI 924 - AT - Service TaxCENVAT Credit - common inputs and input services used for manufacture of its dutiable final products and for providing this exempted service - maintenance of separate records - Rule 6(3) of the Cenvat Credit Rules, 2004 - HELD THAT - It is undisputed that the appellant has been manufacturing goods on job work basis and has been clearing them without paying duty as per the N/N. 214/86-CE dated 25.03.1986. If the activity amounted to manufacture- which has not been disputed by the Revenue at all in the past- it cannot also simultaneously become a service. If the processes undertaken by the appellant on job work did not amount to manufacture and was only a service, Revenue should have said so while assessing its central excise returns - If Revenue was of the opinion that it s original position was not correct and no manufacture was involved at all in the process undertaken by the appellant it should have brought out cogent reasons for holding so. Therefore, there is no basis for the allegation in the show cause notice that the appellant was rendering an exemption service when it was manufacturing dutiable goods. The demand has been made under Rule 6 (3) of CCR, 2004. It has been held by the Hon ble High Court of Andhra Pradesh and Telangana in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT that the various options under Rule 6 are options given to the assessee and the Revenue cannot choose one of the options and force it upon the assessee. Even if the assessee is rendering exempted services or manufacturing exempted goods and using common input services no demand can be sustained under Rule 6 (3) as this is only one of its options available to assessee to fulfill its objection. Thus, the demand of an amount under Rule 6(3) of CCR cannot be sustained even if the appellant was rendering exempted services and had taken CENVAT credit on common inputs/input services. The impugned order, therefore, cannot be sustained and is liable to set aside. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the appellant's job work activity amounts to manufacturing or an exempted service. 2. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004. 3. Legitimacy of the demand for payment and penalties under Rule 6(3) of the Cenvat Credit Rules, 2004. 4. Time-barred nature of the show cause notice. Issue-wise Detailed Analysis: 1. Whether the appellant's job work activity amounts to manufacturing or an exempted service: The appellant, registered with the Central Excise Department, manufactures Copper Wire, Brass Wire, Copper Sheet, and Brass Sheet, and also undertakes job work for other firms. The appellant availed exemption from central excise duty under Notification No. 214/86-CE dated 25.03.1986. The Department issued a show cause notice (SCN) stating that the job work carried out by the appellant is an "exempted service" and demanded payment under Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant contended that it was manufacturing goods on a job work basis and not rendering any service. The Tribunal noted that the appellant's activity amounted to manufacture, which had not been disputed by the Revenue in the past. Therefore, the same activity cannot simultaneously be considered a service. 2. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004: The SCN demanded payment under Rule 6(3) of the Cenvat Credit Rules, 2004, which requires payment of an amount equal to 7% of the value of exempted services if separate records are not maintained for common inputs and input services. The appellant argued that it was manufacturing intermediate goods and not rendering any exempted service. The Tribunal found that the demand under Rule 6(3) cannot be sustained as the appellant was manufacturing dutiable goods on a job work basis and not rendering any exempted service. 3. Legitimacy of the demand for payment and penalties under Rule 6(3) of the Cenvat Credit Rules, 2004: The Original Authority confirmed the demand of Rs. 1,67,85,366/- along with interest and imposed an equivalent penalty. The Tribunal referred to the judgment of the Andhra Pradesh and Telangana High Court in Tiara Advertising vs. Union of India, which held that Rule 6(3) offers options to the assessee, and the Revenue cannot choose one of the options and force it upon the assessee. Therefore, the demand under Rule 6(3) and the penalties imposed were found to be illegitimate. 4. Time-barred nature of the show cause notice: The appellant argued that the SCN was time-barred as all facts of the appellant's activities were within the knowledge of the Department. The Tribunal did not explicitly address the time-barred nature of the SCN but focused on the merits of the case, ultimately setting aside the demand and penalties. Conclusion: The Tribunal concluded that the appellant's job work activity amounted to manufacturing and not an exempted service. The demand under Rule 6(3) of the Cenvat Credit Rules, 2004, and the penalties imposed were not sustainable. The impugned order was set aside, and the appeal was allowed with consequential relief.
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