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TMI Blog2024 (1) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... e with regard to above Clause (c)(iii) of Rule 6(3A) where the credit attributable to the exempted goods needs to be calculated as per the formula M/N*P where P denotes the total credit taken on input services during the financial year. The Commissioner in the impugned order rejects the appellant s contention that the total credit here refers to only the common services which are attributable to dutiable and exempted goods. This issue now stands settled in view of the amendments made to the CCR 2004 vide Notification No. 13/2016-C.E. (NT) dated 01.03.2016 wherein it has been clarified that the formula refers to the common inputs/input services for ascertaining the credit to be reversed on exempted products. The Tribunal in the case of M/S E-CONNECT SOLUTIONS (P) LTD. VERSUS CENTRAL EXCISE AND CENTRAL GOODS SERVICE TAX, UDAIPUR [ 2020 (11) TMI 282 - CESTAT NEW DELHI] observed that It would be clear from a conjoint reading of sub-rules 6(1), (2) and (3) of Rule 6 that the total Cenvat credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and cannot include Cenvat credit on input service exclusively used for the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to exempted goods does not include credit in relation to dutiable goods in terms of Rule 6(3A). Pursuant the amendment, the amount to be reversed under Rule 6(3A) is as follows: A = Ineligible Cenvat Credit (used exclusively in exempted activities) and; D = Ineligible Common Credit (common credit attributable towards exempted goods/services) Therefore, the intention has always been to restrict cenvat credit only to the extent that is used in exempted products/services. Further, reliance is placed on Circular D.O.F. No.334/8/2016-TRU dated 29.2.2016 where it has been stated that as per the formula, the full credit of inputs/input services used exclusively in final products excluding exempted goods will be available to the appellant. It is also stated that only the common credit should be considered for ascertaining the credit to be reversed on the exempted products. Therefore, based on the said amendment and the Circular, the appellant had correctly determined the reversal of the credit and accordingly, the credit reversed by them was in accordance with the law and the impugned order needs to be set aside. 2.1 He also relied on the following case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inputs used for provision of exempted services (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely : - (i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs or services are used in both dutiable and exempted goods/services. The fact that the reversal was done as per the above Rule and promptly intimated the department is not in dispute; the only dispute with regard to above Clause (c)(iii) of Rule 6(3A) where the credit attributable to the exempted goods needs to be calculated as per the formula M/N*P where P denotes the total credit taken on input services during the financial year. The Commissioner in the impugned order rejects the appellant s contention that the total credit here refers to only the common services which are attributable to dutiable and exempted goods. This issue now stands settled in view of the amendments made to the CCR 2004 vide Notification No. 13/2016-C.E. (NT) dated 01.03.2016 wherein it has been clarified that the formula refers to the common inputs/input services for ascertaining the credit to be reversed on exempted products. 5. The Tribunal in the case of E-Connect Solutions (P) Ltd. (supra) observed that: 17. The dispute in the appeal is regarding the interpretation of the term total Cenvat credit provided in the formula in Rule 6(3A)(b)(ii). According to the Department, the total Cenva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service is used in dutiable final products and taxable service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. The Revenue is only interpreting the term total Cenvat credit provided under the formula. If the whole Rule 6(1), (2) and (3) is read harmoniously and conjointly, it is clear that Total Cenvat Credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004 . .when anomaly was noticed, the Government has substituted the sub-rule (3A). The legislators very consciously substituted the Rule with intention to give a clarificatory nature to the provision of sub-rule (3A) so as to make it applicable retrospectively. It was all along not the intention of the Government to deny Cenvat credit on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Rule 6(3) provides an elaborate procedure for reversal of credit on a proportionate basis in respect of those service providers opting not to maintain separate accounts. Rule 6(3A) provides for a procedure for calculating proportionate credit admissible to an assessee. A service provider can avail the entire credit of input services and at the end of every month reverse a provisional amount of credit based on the preceding financial year s turnover for different services, but at the end of the year, the service provider is required to calculate final credit based on the current year s actual turnover figures and make the adjustments. What transpires, therefore, is that in terms of Rule 6(3A), a provider of output service can take only proportionate credit that is attributable to the taxable service. 17. The dispute in the appeal is regarding the interpretation of the term total Cenvat credit provided in the formula in Rule 6(3A)(b)(ii). According to the Department, the total Cenvat credit should include even those services used exclusively in taxable services, including the common service while according to the appellant it should include only common input services and serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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