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TMI Blog2024 (7) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of an amount not extending 20% of the amount of service tax payable of taxable output service. Any credit utilised in excess of 20% would not be admissible in view of the cap prescribed in the rules and therefore to that extent it will be an inadmissible credit for the purpose of discharging service tax liability. However, what is being disputed is that whether there was any restriction in both availment and utilisation of credit or it was only for the purpose of utilisation. Also, whether the remaining surplus credit over and above the cap was otherwise available to them for utilisation in accordance with the CCR - the existence or otherwise of the circular is inconsequential. However, it is not clear as to why Madurai Commissionerate has issued such a Trade Notice based on the Circular and as to whether the same was withdrawn subsequently. However, it is found that the appellants claim to the unutilised credit is correct on merits, there are no reason to go into the circular. The amount which will not lapse has to be utilised only to the extent and in accordance with what is provided within the CCR and since that issue is not before us in the present appeal, it would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant to work out the amount of credit which is required to be recovered from the appellant in respect of availment of input credit despite providing both exempted and dutiable services and admittedly not maintaining any separate account. Interest - HELD THAT:- The first two issues namely utilisation in excess of 20% would not lead to lapsing of the remaining availed credit and also in respect of the option available for calculating the proportionate credit under Rule 6(3)(ii), the interest amount would also have to be re-calculated after ascertaining the exact date of payment of service tax, as also interest paid already, if any. Extended period of limitation - penalty - HELD THAT:- Having provided both exempted and dutiable services, they had not maintained any separate account nor availed various options. Rule 6 of CCR is quite clear that one cannot take Cenvat Credit on such quantity of input or input service, which is used in the manufacture of exempted goods or for provision of exempted services. Therefore, despite being aware that they were not at all entitled for availing the credit in respect of the exempted services, they still continued to avail the same and had als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the provision of both taxable and exempted output service, they were also liable to pay an amount at the rate of 8% of the value of the exempted services. In addition, they were liable to pay interest. 3. In the Order-in-Original, Commissioner has examined issues involved in view of the legal provisions under CCR. These issues are covered as under : (i) Whether an amount of Rs. 92,33,706/- being the credit utilised in excess of 20% of the service tax paid during the period 2005-06 to 2007-08 and is recoverable from them under proviso to Section 73(1) of the Finance Act , 1994. (ii) Whether an amount of Rs. 6,20,97,026/- being 8% on the value of exempted services rendered during the period from 2008-09 to 2009-10 is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 (iii) Whether interest of Rs. 5,58,031/- as mentioned at paras 6(a) (b) is payable by them u/s 75 of the Finance Act, 1994. (iv) Whether interest u/s 75 of the Finance Act, 1994 is payable by them for failure to pay Service Tax/amounts as mentioned at paras (i) and (ii) above (v) Whether interest u/s 75 of the Finance Act, 1994 as mentioned at paras is payable them in respect of Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce provider : - On verification of the documents pertaining to the Cenvat Credit availed , it was observed that in certain case the assessee availed input tax credit before making payment to the service provider. As per Rule 4(7) of Cenvat Credit Rules, 2004, the credit shall be allowed on or after the day on which the payment is made the value of input service and service tax paid or payable as is indicated in the invoice bill or, as the case may be, challan referred to in Rule 9. The credit so utilized by the assessee worked out to Rs. 1,12,029/- as shown in the annexure V to the Notice. The assessee was required to pay interest on the above amount from the date on which credit taken till the date of payment as per Section 75 of Finance Act, 1994. (2) Cenvat Credit taken @ 100%, instead of 50% of capital goods : - On verification of input credit documents for the period from 01.10.2007 to 30.09.2008, it was observed that, the assessee had taken credit on Tyres, Flaps an Rank Hoses etc., received from M/s J.K.Industries and M/s Rank Hydraulics Ltd., treating them as inputs. However, the said items merit classification under Capital Goods as specified under Rule 2 of the Cenvat Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support thereof: a. Infinium Motors Guj. Pvt Ltd., Vs CST, Ahmd [2023 (11) Centax 245 (Tri-Ahmd)] b. Ingersoll-Rand Technologies Services (P) Ltd., Vs CCE, Ghaziabad [2023 (8) Centax 41 (Tri-All)] c. Idea Cellular Ltd., Vs CCE, Thane [2013 (32) STR 294 (Tri-Bom)] For the period from 01.03.2008 to 31.03.2010, they have relied on following judgments: 1. Tiara Advertising Vs UOI [2019 (30) GSTL 474 (Telangana)] 2. Lyka Labs Ltd., Vs CCE ST [2024 (18) CENTAX 367 (Tri-Ahmd)] 3. Rockey Marketing (Chennai) Pvt Ltd., Vs CC,ST, Chennai Final Order No. 40936/2020 4. Cranes Structural Engineers Vs CCE, Bangalore [2017 (374) ELT 112 (Tri-Bang)] 5. Mafatlal Industries Ltd., Vs CCE ST, Ahmd [2020 (43) GSTL 562 (Tri- Ahmd)] 6. Sanofi India Ltd., Vs CCE ST, Surat-II [2023 (5) Centax 270 (Tri- Ahmd)] 7. Mercedes Benz India (P) Ltd., Vs CCE, Pune-I [2015 (40) STR 381 (Tri- Bom)] 8. They have also challenged invokation of extended period on the ground that they had disclosed Cenvat Credit availed on both the inputs and input services clearly in ST returns filed by them and therefore there is no question of suppression of fact or intention to evade payment of service tax. 9. Learned DR reiterates the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1.4.2008, it cannot be said that the credit already availed and accrued shall lapse. As submitted by the appellants, we find that sub-rule (3) of Rule 6 begins with a word Notwithstanding anything contained in sub-rules (1) and (2) . The only inference that can be drawn from the non obstante clause is that the provisions of Rule 3 have an overriding nature. Non obstante clause requires to be inferred in which Supreme Court has held in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. We find that as per our discussion above, there is no provision in the Rules for the credit availed to lapse once the conditions therein have been fulfilled. Therefore, we find that despite the circular the issue is clear. We find that this Bench in the case of DHL Logistics Pvt. Ltd. (supra) has held that: 5.1 As regards the denial of Cenvat credit to the extent of 2.85 crore, on the ground that the appellant did not maintain separate accounts towards utilization of credit in respect of both taxable 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 itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the unutilised credit is correct on merits, we do not find any reason to go into the circular. 13. Therefore, in essence, following the ratio of these judgments of the Co-ordinate Bench, we are inclined to accept the proposition of the Department that appellants were not entitled to utilise more than 20% of the credit availed for discharging the service tax and therefore whatever has been utilised in excess of that cap was liable to be recovered in accordance with the demand made in the show cause notice. However, we are not inclined to accept the proposition that the remaining amount of credit would otherwise lapse, as there was no provision under the rules or statute during said period for such lapsing of the credit or for non-availment of credit, which has also been clarified by the Board vide their Circular referred to in the Order of the Idea Cellular Ltd. It is however to be noted that the amount which will not lapse has to be utilised only to the extent and in accordance with what is provided within the CCR and since that issue is not before us in the present appeal, it would not be desirable to pass any order regarding the manner in which or the extent to which, such cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulting in excess payment of Rs.4,31,586/-. 10. It is observed that the impugned reversal/payments were made in December, 2015 and the refund claim was filed in February,2016. Hence, the refund claim is not hit by time bar. Regarding unjust enrichment, it appears that appellant s claim that they have not passed on the incidence of the impugned amount to any other person is prima facie acceptable. However, this shall be proved by the appellant beyond pale of doubt with the support of documents and records. From the above observation, it can be seen that the appellant has been compelled to reverse credit @ 7% of the value of exempted services under Rule 6 (3) (i) read with Rule 6 (3D) (c) only for the reason they have not followed the procedure of intimating the department with regard to the option exercised. The Tribunal in the case of Philips Carbon Black Ltd. (supra)has observed that noncomlinace with the procedure prescribed under Rule 6 (3A) of the CCR does not result in loosing substantive right to avail the option of reversing proportionate credit as envisaged in Rule 6(3) (i); That procedural lapse is condonable and denial of substantive right is unjustified. Similar view was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal in favour of the assessee and against the Revenue. For the limited purpose of quantification of the amount eligible for refund, we remand the matter to the adjudicating authority. Needless to say that refund being of input service credit, the question of unjust enrichment does not arise. The appeal is allowed in above terms. The Co-ordinate Bench held that the option cannot be forced on the appellant and that non-compliance with the procedure prescribed under Rule 6(3A) of CCR does not result in loosing substantive right to avail the option of reversing proportionate credit as envisaged in Rule 6(3). Therefore, we find that there is merit in the argument of the appellant that he is entitled to opt for payment of an amount equivalent to the Cenvat Credit attributable to, interalia, input services used in or in relation to, provision of exempted services. The calculation of the amount, however, has to be in accordance with the provision envisaged under sub-Rule 3A of Rule 6(3). This recalculation of the amount has to be done. The appellants have submitted certain calculation, however, a detailed verification is required in respect of the credit claimed and the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax payable. However, the quantum of penalty u/s 78 would again have to be re-determined in view of our observations, supra, for re-calculating the liability by extending the option. Therefore, the Adjudicating Authority would decide the applicable penalty under Section 78 after recalculating the payable amount required to be recovered on account of non-payment of service tax or non-payment of amount equivalent as envisaged in the CCR. 17. Therefore, in essence, the entire order is required to be remanded back for re-determination of the amount of credit liable to be recovered from the appellant in view of observations made in foregoing paras and also for re-determination of the amount of interest payable for the failure to pay the service tax or the amount, as is required under the CCR. The appellants would provide all the documents and detailed calculation sheet to the Original Adjudicating Authority. Therefore, the impugned order is modified to that extent and the matter is remanded back to the Original Adjudicating Authority for deciding and re-calculating the demand and imposition of interest and penalty. 18. Appeal is allowed partly by way of remand to Original Au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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