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TMI Blog2024 (10) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Commissioner ( AR ) for the Respondent ORDER RAMESH NAIR The appellant are engaged in the manufacture business of dutiable goods namely Motor Spirit, High Speed Diesel, Naptha, Petroleum coke, bitumen etc. Further, Superior Kerosene Oil (SKO) and Liquefied Petroleum Gas (LPG) necessarily arose in the manufacturing process as a technological necessity. The SKO and LPG which are cleared for sale under the public distribution system (PDS) are exempt from the levy of the excise duty. The appellant under a mistaken belief that the same were manufactured goods reversed proportionate Cenvat credit on common input and input services used in the manufacturing process in compliance with the provisions of Rule 6 of Cenvat Credit Rules, 2004. The appellant did not avail any Cenvat credit of duty/ tax paid on input and input services exclusively used by it in respect of generation LPG and SKO. The dispute in the present case pertains to reversal of Cenvat credit under Rule 6 (3 ) read with Rule 6 (3A) of Cenvat Credit Rules, 2004 i.e. whether such reversal ought to be computed on total credit or common credit. Rule 6 (3) places an obligation on the assessee for reversal of Cenvat cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2023] Sterling Gelatin [2015 (320) E.L.T. A343 (S.C.)] Hindustan Zinc Ltd. [2014 (303) E.L.T. 321 (S.C.)] 3. Shri Rajesh Nathan, Learned Assistant Commissioner appearing on behalf of the Revenue reiterates the finding of the impugned order. 4. We have carefully considered the submission made by both sides and perused the records. We find that the limited issue to be decided in the present case is that for the purpose of reversal of proportionate Cenvat credit attributed to the exempted goods for the purpose of formula for calculation of such amount whether total Cenvat credit of all the inputs and input service is to be taken or only total Cenvat credit of common input and input service used in dutiable and exempted goods has to be taken. On this issue due to serious confusion that whether the total Cenvat credit has to be taken or only total Cenvat credit of common input and input service used in dutiable and exempted goods has to be taken for the purpose of formula under Rule 6 (3A). An amendment was brought by substitution vide Notification No. 13/2016-CE(NT) dated 01.03.2016 whereby it was clarified that the total Cenvat credit means the credit availed on common inputs and inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of sub-rule (3A) shall not apply for such payment : Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i) : Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be six per cent. of the value so exempted. Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II. - For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month. 4.2 Rule 6(1) of the Rules curtails the manufacturer from availing Cenvat credit on input and input services used for exempted goods. This clearly means that credit is allowed to be taken only on Input and Input services pertaining to dutiable goods. 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). 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 and input service and cannot include Cenvat credit on input and 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 and 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. 4.3 We noticed that an am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s B, and shall not be required to be paid; (iii) credit left after attribution of credit under sub-clauses (i) and (ii) shall be called common credit, denoted as C and calculated as, - C = T - (A + B); Explanation. - Where the entire credit has been attributed under sub-clauses (i) and (ii), namely ineligible credit or eligible credit, there shall be left no common credit for further attribution; (iv) the amount of common credit attributable towards exempted goods removed or for provision of exempted services shall be called ineligible common credit, denoted as D and calculated as follows and shall be paid, - D = (E/F) x C; where E is the sum total of - (a) value of exempted services provided; and (b) value of exempted goods removed, during the preceding financial year; where F is the sum total of - (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed, and (d) value of exempted goods removed, during the preceding financial year : Provided that where no final products were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e removed thereby. As per this interpretation of the Hon ble Supreme Court, the sub-rule (3A) being substitution shall have a retrospective effect and will be applicable for all time since when the Rule was enacted. Therefore, for this reason also, for the purpose of calculation of Cenvat credit reversal, in the formula, total Cenvat credit shall mean credit of only common input and input service and not of input and input service exclusively used for the manufacture of dutiable product on which the Cenvat credit is eligible to the appellant in its entirety. 4.5 We also find that the as regard to availment of Cenvat credit on inputs and input services used for manufacture of LPG SKO, the issue is no more res integra in view of the Hon ble High Court of Gujarat decision in the case of M/s Reliance Industries Ltd. 2022(382)ELT 53 (Guj), wherein the Hon ble High Court has held that LPG is a by product generated in the process of refining and no reversal is required in this matter. We also find that the said disputed issue are also decided in favour of the assessee in the matter of Reliance Industries Ltd. [2023-TIOL-1130-HC-AHM-CX] , Reliance Industries Ltd. Excise Appeal No. 89137 of ..... 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