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TMI Blog2013 (3) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... Held that:- Since the appellant has already reversed the said amount and shown in their ER-1 Return no further reversal arise. - Demand set aside - decided in favor of assessee. - 73/2011 - - - Dated:- 28-10-2011 - Shri P. Ayyam Perumal, J. Shri K.S. Venkatagiri, Advocate, for the Appellant. Shri R. Vasudevan, Inspector, LTG-3, for the Respondent. ORDER This is an appeal filed by M/s. Chennai Petroleum Corporation Ltd., Manali, Chennai-600 068 (hereinafter referred as the appellant) against Order No. IV/16/321/2009, dated 20-7-2010. The brief facts of the case are that the appellant, a Petroleum Refinery, opted for Rule 6(3)(ii) of Cenvat Credit Rules, 2004 (the said Rules, for short) for reversal of Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services for the financial year 2008-09. The actual Cenvat credit required to be reversed finally as per Rule 6(3A)(c) of the said Rules was determined by them as ₹ 3,57,05,504/-. The appellant reversed ₹ 3,51,24,483 provisionally as per Rule 6(3A)(b) of the said Rules during 2008-09 and the balance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and services that were exclusively used in the manufacture of dutiable goods and taxable services is also to be taken into account as claimed by the department; (ii) that the impugned order has been passed against the provision of Rule 6(3)(ii) of the said rules wherein the manufacturer of goods or provider of output service shall pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A) and so the credit to be paid back is the credit attributable to the manufacture of exempted goods only and going by the above provision of this sub-rule, there is no need to include the duty paid on input and tax paid on input services that were used exclusively in the manufacture of dutiable goods; (iii) that going by the previous history of the Modvat Rule also the credit to be paid back is the credit on common inputs and common input services and not for inputs and services that were used exclusively for manufacture and clearance of dutiable goods/taxable services; (iv) that the values for L a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble goods and taxable services should be subjected to proportionate reversal. 8. According to Rule 6(1) of CCR 2004, Cenvat credit shall not be allowed on such quantity of input and input services which are used in exempted goods. Rule 6(2) requires a manufacturer to maintain separate accounts of the inputs and input services used in providing both taxable and exempted services and avail credit only on such portion of the inputs and input services used in providing taxable services. A careful reading of sub-rule (1) along with sub-rule (2) of Rule 6 would show that the application of the provision itself is in respect of common inputs and input services that have been used in providing both taxable and exempted services, and not taxable or exempted services. Therefore, it can be rightly concluded that the provisions of sub-rule (2) itself is applicable only to common inputs and input services used in providing both taxable and exempted services and not otherwise. 8.1 Rule 3 provides that Cenvat credit can be taken by the manufacturer of final product and taxable service provider and Rule 6 casts certain obligation on the manufacturer of dutiable and exempted goods. Thus, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no question of including other credits which are not at all covered by the provisions of Rule 6(3) because the credit of service tax paid on inputs or input services exclusively used in providing exempted services automatically get excluded because of the provisions of Rule 6(1) of the said Rules. If the view of the order is accepted, it would lead to a situation of denying part of Cenvat credit on inputs and input services which are used exclusively in or in relation to the manufacture of dutiable goods/taxable services, which is not the intention of the said rules. 8.4 This issue has been clarified vide Board s Circular No. 754/70/2003-CX., dated 9-10-2003 wherein it clarified in respect of Rule 6 of CCR 2002, where the issue arose whether by paying 8% on the value of the exempted goods, the manufacturer can take all Cenvat credits including those which are specifically used in exempted goods. The Board had clarified that Rule 6 is only for common inputs and input services and the 8% reversal is only for common inputs and input services alone. The relevant extract is as under : 2. ..Thus, it is clear that the option to maintain the separate accounts or payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or in relation to manufacture of both category of final product i.e. dutiable as well as exempted - Modvat credit not available in respect of inputs exclusively used in or in relation to manufacture of exempted variety. 8.6 The dispute between the appellant and the department is the meaning of the parameter L and P i.e., whether, in the determination of the attributable Cenvat credit for exempted goods and exempted services the value would include only the value of common inputs and common services used in the manufacture of exempted goods/rendering of exempted services as claimed by the appellant or the value of goods and services that were exclusively used in the manufacture of dutiable goods and taxable services is also to be taken into account as claimed by the department. There is no necessity to take into account the value of inputs and input services that were used exclusively for the manufacture of dutiable goods/taxable services as the credit on those is eligible straightaway and there is no necessity to reduce the same to determine the amount of credit to be expunged. 8.7 The values for L and P given in the Rule are to be read in the context and not in is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulae (M/N) multiplied by P, [M] denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year and [N] denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed during the financial year. As per Rule 6(6), in respect of goods specified in the said Rule, the provisions of sub-rules (1), (2), (3) and (4) of Rule 6 ibid will not apply. The appellant s submission is that the value of Rule 6(6) clearances should be excluded from the value of exempted goods for the purpose of numerator [M] while it should be included for the denominator [N]. I find that the plea of the appellant is inconsistent. The instant case falls under Rule 6(3)(ii) of CCR 2004 [for which the procedure is prescribed in Rule 6(3A)], the value of goods removed which are specified under Rule 6(6) has to be excluded in computing the Cenvat credit attributable to exempted goods and exempted services under Rule 6(3A). I hold that the value of such clearances should not be taken into account at all for the purpose of Rule 6(3A)(c) and it has to be excluded both from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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