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TMI Blog2019 (6) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2004. The Commissioner, vide OIO, 16/ANS-16/Spice/ Th-I/2012 dated 29-1-2013, held that the balance 80% of the credit which is not utilisable prior to 01.06.2007 shall lapse. Commissioner relies upon judgment of Gujarat Narmada Fertilisers (2009) 240 ELT (661) and held that SC judgment will override the circular, F. No. 137/203/2007 CX-4 dated 01.10.2007, in view of Ratan Melting and Wire Industries reported in 2008 (231) ELT 22. Hence, this appeal. 2. Shri S.S. Gupta, Chartered Accountant, appearing for the Appellants, submits that Rule 6(1) of CCR, 2004 is substantive Rule and provides that the manufacturer or provider of output service is not entitled for the credit of such quantity of input or input services which is used in the manufacture of exempted goods or exempted service except in the circumstances mentioned in Sub-Rule (2) of said Rules. The said Sub-Rule (2) of Rule 6 provides for maintenance of separate records in respect of input, input services substantiating use of input and input services for taxable and exempted services. The Sub-Rule (3) of Rule 6 provides that in case separate accounts are not maintained the manufacturer or provider of services shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause, in the case of (i). CCE, Goa Vs V.M. Salgaonkar & Bros. Pvt Ltd. 2008 (10) STR 609 (Tri. - Mumbai) (ii). Lemon Tree Hotels Pvt Ltd. Vs CST, Chennai 2018 (13) GSTL 305 (Tri. - Chennai) (iii). Idea Cellular Ltd Vs CCE, Rohtak 2009 (16) STR 712 (Tri. - Del.) This was clarified vide circular F. No. 137/203/2007 CX-4 dated 01.10.2007. The Bombay High Court in the case of CCE, Thane-I Vs Nicholas Piramal (India) Ltd. 2009 (244) ELT 321 (Bom.) while interpreting the provisions of Rule 6 has held that plain meaning of the language used in the Rule shall be adopted if the same is unambiguous. 2.2. Learned Chartered Accountant submits that the combined reading of Rule 3 and Rule 6 of Cenvat Credit Rule, 2004 ensures fulfillment of provisions of Section 94(eee) of Chapter V of Finance Act 1994. Rule 3 of Cenvat Credit Rules, 2004, provides for the eligibility and states that the manufacturer or provider of output service shall be allowed to take credit on any input or input services received by him. In this case, there is no dispute that the appellants have provided taxable output service. The Rule 6 provides the mechanism to offset the credit which has been used for provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai bench of the tribunal in the case of DHL Logistics Pvt Ltd 2015 (38) STR 620(Tri- Mumbai); it was held that Prior to 1-4-2008, restriction was only utilization of credit and not taking of credit per se; credit taken could be carried forward and accumulated; unutilised credit on account of restriction on utilisation under Rule 6(3)(c) of the Cenvat credit Rules, 2004 will not lapse and further after removal of cap of 20% w.e.f. 1-4-2008, appellant eligible to utilize the credit. In the following cases also, Tribunal held that accumulated unutilised credit on account of restriction on utilisation under Rule 6(3)(c) of the Cenvat credit Rules, 2004 will not lapse. * Mumbai International Airport Pvt Ltd 2014 (33) STR 308 (Tri - Mumbai) * Federal Express Corporation 2014 (36) STR 375 (Tri - Mumbai) Thus, once the appellant started to provide all the taxable services from 01.06.2007, restriction under Rule 6(3)(c) relating to utilisation will not apply. Tribunal in the case of Grasim Industries: 2007 (208) E.L.T. 336 (Tri. - LB) has held that the credit is not required to be reversed unless specifically provided by law. 2.6. Learned Chartered Accountant further submits that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue to prove allegation of wilful misstatement; onus is not on assessee to prove its bona fides. Further Supreme Court held, in the case of Continental Foundation Joint Venture: 2007 (216) ELT 177 (SC), that mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. The appellant was under bona fide belief that when there is no lapsing provisions in the Rules, appellant can carry forward and utilised the credit in full in view of ratio of cases cited above and the CBEC circular dated 21.11.2008. As there was no mala fide intention, extended period of limitation not invokable in view of the Cosmic Dye Chemical: 1995 (75) ELT 721 (SC) and Chemphar Drug and Liniments: 1989(40) ELT 276 (SC). 2.9. Learned Chartered Accountant also submits, without prejudice to the issues raised above, issue relates to the interpretation of provisions and therefore extended period of limitation should not be invoked. Appellant relies upon the following judgments. (i). Continental Foundation Joint Venture 2007 (216) ELT 177 (SC) (ii). Lanxess Abs Ltd. 2011 (22) STR. 587 (Tri - Ahmd) (iii). ITW India Ltd 2009 (14) STR 826 (T) 3. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as has been used for providing exempt services. Rule 6(2) of the Cenvat Credit Rules accordingly prescribes that separate account should be maintained for the quantity of input and input service meant for use in providing output service and exempt service. It clearly prescribes that credit only of the input used for providing output service on which service tax is payable can be availed. However, it was submitted, that there may be conditions where it was practically not possible for a manufacturer or a provider of taxable service to maintain separate accounts. Accordingly, a procedural facility has been granted under Rule 6(3) of the Cenvat Credit Rules where it was not possible for manufacturers / service providers to maintain separate accounts and reverse actual amount used for providing exempt services / exempt goods. A detailed reading of Rule 6(3) reveals that it provides that in respect of certain goods, Cenvat credit was required to be reversed. Rule 6(3)(b) provided that the manufacturer shall "pay an amount equal to 10% of the total price." It was submitted that as the mode rate of exempt duty was 14% in the relevant years, a payment of 10% of the total price of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the enactment with a view to pick holes or to search for defects of drafting which make its working impossible. It is a cardinal principle of construction of a statute that effort should be made in construing the different provisions so that each provision will have its play and in the event of any conflict a harmonious construction should be given. The well-known principle of harmonious construction is that effect shall be given to all the provisions and for that any provision of the statute should be construed with reference to the other provisions so as to make it workable. A particular provision cannot be picked up and interpreted to defeat another provision made in that behalf under the statute" Similarly, Hon'ble Supreme Court, in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt Ltd. [2018(10) GSTL 401(SC)], held ( para 26, 27, 28) that; "26. It is trite that Rules cannot go beyond the statute. In Babaji Kondaji Garad, this Rule was enunciated in the following manner: "Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by a field formation, and it is not known as to who had approved the issuance of the said purported circular. It appears to be just a letter and not a circular duly approved by the Government. It was further submitted that to establish the veracity of the said purported circular, a reference was sent to the Commissioner Service Tax, CBIC and Under Secretary, CBIC vide their letter dated 28..12.2018 informed that as the above said file is not traceable the authenticity of the subject letter cannot be confirmed by them. It is pertinent to note that the letter from CBIC refers to the said communication as a letter and not as a circular. He therefore submits that the case laws relied upon by the appellants are per in curium as they have not considered the relevant provisions of law but had solely relied upon the purported circular issued by CBIC. As submitted above the authenticity of the letter, which is referred to as circular in the judgment, could not be established. In view of the same it is submitted that reliance cannot be placed on the case cited by the appellants and they will not have any precedence value. Accordingly, the appellants are eligible to avail cannot have 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance as on 31-03-2008. 4.2. Chartered Accountant, appearing for the Appellants also submits that the copy of the circular as extracted from the website of www.taxmanagmentindia.com is attached; it is evident from the said circular that it is issued by Shri Gautam Bhattacharya, Commissioner of Service Tax; this circular bears instruction No .F. No.137/172/2008- CX.4 issued from file F. No. 137/172/2008-CX.4 dated 21-11-2008; Madurai Commissionerate has issued Trade Notice No. 14/2009 dated 13-3-2009, Service Tax No. 6/2009 based on the said instruction; the said circular also relies upon the Boards letter/ instruction F. No.137/72/2008-CX.4; if such instruction/circular did not exist, Madurai Commissionerate could not have issued a trade notice. In view of Supreme Court's interpretation of provisions of section 119 of Income Tax Act, 1961, in the case of Azadi Bachao Andolan And Anr. 2004-(091)-AIR-1107-(SC), any order/instruction/letter/directions issued by CBEC is considered as in compliance with the provisions of section 37B of Central Excise Act, 1944. This circular has been followed in Mumbai International Airport Ltd 2004 (33) STR 308 (Tri. Mumbai) and Federal Express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service from 10-9- 2004, then they would have provided the same as they did after 1-4- 2008; it cannot be presumed that the legislature was not aware of the fact that balance credit will be utilized by the service provider. Even w.e.f. 1-4-2008, no provision was bought for lapsing of credit which remained as balance with service provider as on 1-4-2008. 4.6. Whether the appellant could avail of the full Cenvat, and utilize 20% of the same while carrying forward the balance 80%, under erstwhile Rule 6(3)(c) of Cenvat Credit Rules, even though they were providing both taxable as well as exempted services. The submission of the appellants is that they were entitled to avail of the full Cenvat and the restriction was only on utilization of the same to the extent of 20% of the Cenvat Credit availed. It is not in dispute that M/s. Idea Cellular were providing taxable as well as exempt / non-taxable service during the relevant period. The compilation of the case laws relied upon by the Department has already been submitted. 5. Heard both sides and perused the records of the case. Brief issue that requires consideration in the instant case is whether the appellants, while providi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all follow either of the following conditions, as applicable to him, namely:- (a) If the exempted goods are ...... (b) .... (c) The provider of output service shall utilise credit only to extent of an amount not exceeding twenty per cent of the amount of service tax payable on taxable output service. Explanation I - The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in Rule 14, for recovery of CENVAT Credit wrongly taken. ............... Rules 6 of CENVAT Credit Rules as on1.4.2008 (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule (2): [Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in Rule 12AA of the Central Excise Rules, 2002, on the ground that the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of input or input services which are used in the manufacture of exempted goods or exempted service except in the circumstances mentioned in the sub-rule (2) of the said Rules. Sub-rule (2) of Rule 6 provides for maintenance of separate records in respect of inputs, input services substantiating use of input and input services for taxable and exempted goods or services. Sub-rule (3) of Rule 6 provides that in case separate accounts are not maintained, the manufacturer or provider of services shall follow either of the conditions stipulated in sub-rule (3) of Rule 6. It is pertinent to note that after the amendment the only change that could be seen in respect of sub-rule (3) is to the extent of payment in respect of exempted goods produced or exempted services provided. While there is a cap on the utilisation of credit attributable to exempted goods or services, there is no cap whatsoever on the availment of CENVAT credit and there is no mention of any lapse of credit after utilisation of credit of 20% prior to 1.4.2008 or after payment of requisite percentage of value after 1.4.2008. Just because the services provided by the appellants have become taxable with effect from 1.4.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR for the Department has submitted that Madras High Court in the case of Ruchika Global Interlinks (supra) has interpreted that restriction on utilisation shall amount to restriction on availment, the learned counsel for the appellants submits that the issue before Hon'ble Madras High Court was in relation to use of input services for trading activity and not in the course of provision of an exempted service. He submits that as held by Bombay High Court in the case of Industrial Credit and Investment Corporation (supra) the ratio of a case can be followed only when the matter was directly on the issue, the issue needs to have been decided and the matter has been decided by giving reasons. We find that the questions of law framed and answered in the above case are: (a) Whether in the facts and circumstances of the case, Rule 6(3)(c) of Cenvat Credit Rules, 2002, attracted, in cases, where the Service Tax on input services are not used in respect of trading activity but used only for taxable services? (b) Whether in the facts and circumstances of the case, trading activity can be categorized as an exempted service for the purpose of invoking Rule 6 of Cenvat Credit Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able and exempt services and also utilization of credit in excess of 20%, it is noted that the cap of 20% is applicable on the service tax payable and not on the service tax credit actually availed. What is restricted is only utilisation of the credit and not taking the credit per se; the credit taken could be carried forward. When the cap was removed on 1-4-2008, the appellant was eligible to utilise the credit also. In the present case what is involved is the utilisation of credit in excess of 20% of the tax payable during the impugned period which was permitted. Therefore, utilising the credit in excess of the limit would attract only interest liability. The entire service tax itself cannot be denied to the appellant. This position has been clarified by the C.B.E. & C. vide a circular dated 21-11-2008 cited supra and the Ministry clarified as follows: "Prior to 1-4-2008 [before the amendment in Rule 6(3)] the option available to the taxpayer, under Rule 6(3), was that, he was allowed to utilize credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output service. However, there was no restriction in taking Cenvat credit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersal of the same; moreover, department issued a show-cause notice dated 25.3.2009 and 17.10.2008 in respect of utilisation of credit in excess of 20% of tax payable on output service; and therefore, extended period cannot be invoked. The learned Principal Commissioner (AR) submits that the appellants at no stage declared to the Department that they were availing full CENVAT Credit and not 20% of CENVAT credit as prescribed and therefore, in view of the following cases, extended period is invokable. * M/s. FL Smidth Pvt. Ltd.: 2014-TIOL-2186-HC-MAD-CX * CCE vs. Rathi Steel & Power Ltd.: 2015 (321) ELT 200 (All.) * Merck Specialities Pvt. Ltd.: 2018-TIOL-1757-CESTAT BANG. 5.7. In the instant case, the issue involved as far as time bar is concerned is not only the submission of ST3 returns and the details contained therein. The appellant submitted that department has already served two show-cause notices on an issue which is an offshoot of the issue before us. The show-cause notices issued in 2009 and 2008 are in relation to excess utilisation of credit of input services vis-à-vis exempted services. Understandably, the show-cause notices must have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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