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TMI Blog2024 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... include credit taken on input services and exclusively utilised in providing taxable output services; thus, only the credit taken on common input services which are utilised in providing both taxable as well as exempted services to be considered for arriving at the proportionate credit attributable to exempted services when common input services are utilised for providing both taxable as well as exempted services. As decided in M/S. THYSSENKRUPP INDUSTRIES INDIA PVT. LTD. VERSUS COMMISSIONER OF CE ST, PUNE-I [ 2023 (2) TMI 1343 - CESTAT MUMBAI] main basis on which the demands were raised in both the Show Cause Notices have already been dropped by the adjudicating authority since the appellant had reversed proportionate amount of credit. Only the computation of the amount to be reversed is in dispute. The adjudicating authority has erred in (a) taking the total turnover of traded goods as the value of trading service instead of following Explanation 1(c) to Rule 6 to calculate the value of trading service; (b) For the periods covered in both appeals, the adjudicating authority has erred in reckoning the total credit taken instead of credit on common input services in calculating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice and accordingly condition laid down under Rule 3 of CCR, 2004 will not be satisfied; but since they provide both taxable and exempted service (trading), they avail credit on all input services. Further, he has submitted that the Department at the time of audit has not disputed the fact that appellant cannot avail credit on common input services. The allegation made by the Department was that the availment of credit shall be proportionate to the taxable service and not in its entirety. He has submitted that once the credit is found to be eligible under rule 3(1) of CCR, there is no further requirement that proportionate credit needs to be reversed on services which are exclusively used for taxable services. He has submitted that reversal under rule 6(3) is required only with respect to common input services, which has already been reversed by the appellant. In support of his contention, he has placed reliance of the decision of Tribunal in the case of National Steel Agro Industries Limited Vs. Principal Commissioner [2021-VIL-207-CESTAT-DEL-CE]. Further, he has submitted that amendment to Rule 6(3A) of CCR held to be clarificatory and thus applicable retrospectively; therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved as follows:- 4.3 From the impugned order reproduced as above the only dispute in the matter is in relation to determination of the value of factors M , N P in the formula prescribed as per the Rule 6 (3A) for the determination of the proportionate credit to be reversed in respect of the common input services used for providing the exempted services trading activities and used in manufacture of the dutiable goods. We find the issue has been settled by the tribunal in the case of E-Connect Systems [2021 (376) ELT 678 (T-Del)] holding as follows: 14. The issue that arises for consideration in this appeal is regarding the manner of computation of proportionate reversal of credit determined under Rule 6(3A) of the Rules. The contention of the Department is that for the purpose of reversal, the total Cenvat credit taken on input services, including the common input services should be considered while the contention of the appellant is that total Cenvat credit taken on input services should include only common input services and services used in exempted services and not the services used exclusively in rendering taxable output services. 15. In order to appreciate contentions, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services. Explanation III. - No CENVAT credit shall be taken on the duty or tax paid on any goods and services that are not inputs or input services. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer 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 optio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rendering taxable service. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to read the relevant Rule 6(1), (2), (3) pre and post-amendment notification 10. From the above it can be seen that 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 the input/input service even though used in the dutiable goods. Keeping the said view in mind, the substitution in sub-rule (3A) of Rule 6 was made. Therefore, the substituted provision of subrule (3A) shall have retrospective effect being clarificatory. 4.4 In case of National Steel Agro Industries Ltd. [Final Order No 51518-51519/2021 dated 25.05.2021, following has been held: 26. It is clear from the above, that the final amount to be debited as inadmissible CENVAT credit under Rule 6(3A) is D=(E/F)xC where, E represents the sum of value of exempted goods and exempted services, F represents the sum of value of exempted and dutiable goods as well as exempted and nonexempted services. C is calculated as C = T (A+B) where T is the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he credit taken on common input services but also credit taken on input services used in manufacture of dutiable goods. According to the appellant only the CENVAT credit taken on common input services should be considered as the total CENVAT Credit taken since that is the credit in dispute which can be disallowed in proportion to the value of the exempted services to the total turnover. 30. To appreciate this issue, Rule 6 must be read as a whole while interpreting this formula. Rule 6(1) prohibits any credit on inputs and input services used in or in relation to exempted goods or exempted services. The rationale of this provision is evident. CENVAT credit enables one to use the credit to reduce duty or tax liability on the output goods or services. If they are not chargeable to duty or tax, one cannot take credit either. However, there are those who produce both dutiable and exempted goods and taxable and exempted services. Rule 6(2) deals with such situations and requires such a person to maintain separate records and take credit only the inputs and input services which are used for manufacture of dutiable goods or provision of taxable services. However, if one produces both duti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice/dutiable goods, CENVAT credit is allowed. Sub-rule (2) of Rule 6 is only as an option that if any input or input services used in exempted goods, credit should not be allowed and only with this intention some mechanisms for expunging CENVAT credit attributed only to the exempted goods are provided. As per clause (b) (ii) (iv), it is clearly provided that entire credit in respect of receipt and use of inputs/ input service is allowed when such input and input 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)(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 duti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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