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TMI Blog2019 (11) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rule 6(3) of CCR 2004 - the inputs which were used for manufacture of the exempted products - Whether the appellant is liable to pay an amount under Rule 6(3)(1) when they have reversed proportionate amount of CENVAT Credit on the inputs used in manufacture of exempted products? - HELD THAT:- Rule 6(2) provides the assessee an option to maintain separate accounts for receipt consumption, inventory of inputs used in relation to manufacture of exempted goods and dutiable goods and take CENVAT Credit only on inputs used in manufacture of dutiable goods. In the case of ASTRIX LABORATORIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, HYDERABAD-I [ 2019 (5) TMI 1344 - CESTAT HYDERABAD ] and MATRIX LABORATORIES LTD VERSUS CCCE ST, HYDERABAD - I [ 2018 (8) TMI 1440 - CESTAT HYDERABAD ], the appellant had taken CENVAT Credit only on the inputs which have gone into manufacture of dutiable goods. A plain reading of Rule 6(2) does not require separate stocks of inputs to be maintained. It also does not require that the inputs should be bought under different invoices. What is required is maintenance of separate accounts. The appellant in this case has, by revers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of buying and selling or bartering commodities (Indian Contract Act (9 of 1872). (b) BLACK s LAW DICTIONARY The business of buying and selling esp. of commodities and securities . 3. It is the case of Ld. Counsel for the appellant that Rule 3(5) of CCR 2004 has a specific provision as far as removal of inputs as such is concerned. It reads as follows: When inputs or capital goods on which CENVAT Credit has been taken, are removed as such from the factory or premises of the provider of output service, the manufacturer of the final products or the provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an Invoice referred to in Rule 9. 4. He would submit that this rule does not distinguish between the clearance of the inputs as such for sale or for any other purpose. As long as they fall within the scope of definition of Rule 3(5) and have operated within it, they cannot be burdened with a demand under Rule 6(3). He would submit that there is no dispute th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amount. He draws the attention of the Bench to the Work sheet at Page 153 of the paper book to explain how the amount was reversed. He would rely on the case laws of Astrix Laboratories Limited vs. CCE, C ST, Hyderabad-I [2019(5)TMI 1344-CESTAT-HYDERABAD] and Matrix Laboratories Ltd. vs. CCCE ST, Hyderabad-I [2018(8) TMI 1440-CESTAT-Hyderabad] to assert that such reversal is acceptable in case of pharmaceutical industry. 7. Ld. DR draws the attention of the Bench to Rule 6 of CCR 2004, which reads as follows: Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- 6(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 for provision of 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 inputs are used in the manufacture of goods cleared without payment of duty under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturer of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- (i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,- (i) the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, denoted as A; (ii) the amount of CENVAT credit attributable to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial year, 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, and P denotes total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there under. Explanation II .-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III .- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. 8. He would argue that in terms of Rule 6(1), the assessee cannot take CENVAT Credit in respect of the inputs used in manufacture of the exempted products. In terms of Rule 6(2) where the manufacturer is manufacturing both exempted and dutiable products, he has to maintain separate accounts and take CENVAT Credit only on the inputs which are used in manufacture of dutiable products. If the assessee cannot do either of the above and takes CENVAT Credit on the entire qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attributable to the inputs which have gone into the manufacture of final products. In both the cases, the formula which has been adopted was based on the standard norms for manufacture of each pharmaceutical drug. Therefore, their activity is covered under Rule 6(2) of CCR 2004. 10. I have considered the arguments on both sides and perused the records. The first question is whether the appellant is required to pay amount under Rule 6(3) in respect of exempted service viz: trading undertaken by them or they could reverse an amount under Rule 3(5) when the inputs are removed as such. I find from the rules that both options are open. Rule 3(5) does not make a distinction based on the purpose for which the inputs are removed as such; whether the inputs are removed as such for sale or otherwise makes no difference to the applicability of Rule 3(5) of CCR 2004. It is true that trading is an exempted service and Rule 6(3) covers exempted services. However, having reversed an amount under Rule 3(5) of CCR 2004, the appellant will not be covered by Rule 6(3) because the credit attributable to the inputs removed as such, has already been reversed. In view of the above, I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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