Custom, Excise & Service Tax Tribunal
Lotte India Corporation Ltd vs Commissioner Of Gst&Amp;Cce(Trichy) on 29 January, 2020
CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, SZB, CHENNAI
REGIONAL BENCH - SM 3 B3
Excise Appeal No. E/41405 of 2018
(Arising out of Order-in-Appeal No. 70/2018 - TRY dated
15.03.2018 passed by the Commissioner of GST & Central
Excise (Appeals), Trichy).
M/s. Lotte India Corporation Ltd. Appellant
Nellikuppam, Cuddalore
Vs.
The Commissioner of GST & CE (A) Respondent
No. 1, Williams Road, Cantonment, Trichy-620 001.
APPEARANCE:
Shri M.N. Bharathi, Learned Advocate for the appellant Shri Arul C. Durairaj, Supdt., Ld. Departmental Representative for the Respondent CORAM:
HON'BLE MR P.DINESHA, Judicial Member FINAL ORDER No. 40051/2020 Date of Hearing: 29.01.2020 Date of Decision: 29.01.2020 The appellant M/s. Lotte India Corporation Ltd., are the manufacturers of sugar confectionery and are availing input credit , capital goods credit and input service credit for dutiable as well as 2 exempted goods under Cenvat Credit Rules, 2004.
During verification of ER-1 returns department noticed a short payment of Rs. 13,96,785/- for the period 2014-15 and issued a Show Cause notice dated 15.06.2016. On adjudication, the adjudicating authority vide Order-in-Original No. 38/2016 dated 12.12.2016 confirmed the proposals made in the SCN. On appeal, the Commissioner (Appeals) vide the impugned order set aside the penalty but upheld recovery of Rs. 13,96,785/- with interest. Aggrieved by the order of the Commissioner (Appeals), appellant is before this forum.
2.1 Shri M.N. Bharathi, Learned Advocate, appeared for the appellant and submitted that the issue to be decided is whether calculation of cenvat credit to be reversed in cases of inputs or input services attributable to both exempted goods/exempted services and dutiable goods and taxable services, the total credit that should be taken for calculation in terms of Cenvat Credit Rule 6 (3A) should be restricted to only common inputs or common input services only?
32.2 According to the Learned Commissioner (Appeals) Rule 6 (3A) clearly states that it is total Cenvat credit taken on input services and the appellant has taken into account only the common input services and hence confirmed recovery of the short payment of Rs. 13,96,785/-. Learned Advocate further submitted that the appellant's case is covered by the decision of the Ahmedabad Tribunal in the case of Commissioner of Central Excise & ST, Rajkot Vs. Reliance Industries Ltd. -
2019 (28) GSTL 96 (Tri.-Ahmd.), wherein it had been held that 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" 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 and 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. Therefore, even according to Cenvat 4 Credit Rules and more particularly according to Rules 6 (2), 6 (3), the total credit mentioned therein cannot refer to entire credit available and taken but it must be restricted to only such credit attributable to dutiable and exempted goods taxable and exempted services only and without the rationalization. Hence, he prayed for setting aside the impugned order.
3. Shri Arul C. Durairaj, Superintendent (AR) appeared for the Revenue and supported the findings of lower authorities.
4.1 After hearing both sides and having perused the material on record as also the decision of the Ahmedabad Tribunal relied on by the Learned Advocate, I find that issue on hand is no more res integra. The relevant portions relied on by the Learned Advocate are reproduced below:-
"3. Shri Vishal Agarwal along with Ms. Dimple Gohil appearing on behalf of the respondent submits that primary dispute raised in the present appeal is whether, for the purpose of reversal of Cenvat credit in terms of Rule 6(3A), the total Cenvat credit means, only total of common input service or total of common input service plus credit of input service used exclusively in the manufacture of dutiable goods also. He submits that from the plain and conjoint reading of sub-rules (1), (2) and (3) of Rule 6 of Cenvat Credit Rules, it becomes clear that said Rule came into play when the manufacturer manufactures but different kind of goods i.e. one being dutiable goods and other being exempted goods. He submits that as per Rule 6(1), 5 credit of only those input/input service which are used in the manufacture of exempted goods are not allowed. However, the same does not apply to the input/input service used in the manufacture of dutiable goods. He submits that as per Rule 6(2), the assessee can avail credit only on such input/input service which are used in or in relation to manufacture of dutiable final product. As per Rule 6(3), the manufacturer opting not to maintain separate accounts, can opt to pay an amount in terms of the formula prescribed in sub-rule (3A). He submits that in so far as the common input/input service is concerned, Rule 6 envisages that the same shall be apportioned on the basis of turnover of dutiable and exempted goods. It is in this context that the expression "total Cenvat credit taken" used in Rule 6(3A)(c)(iii) refers to the total Cenvat credit on common input services alone and not the total Cenvat credit on all input services.
7. We have carefully considered the submissions made by both the sides and perused the record. The limited issue to be decided in this case is that for the purpose of calculating the Cenvat credit for reversal in terms of Rule 6(3A) as per of formula given therein, whether the total Cenvat credit means it is including the Cenvat credit of input services exclusively used for dutiable product should be taken or total Cenvat credit of only common input service should be taken. Before proceeding, it is necessary to read the relevant Rule 6(1), (2) and (3) pre- and post-amendment Notification 13/2016-C.E., dated 1-3-2016, which is reproduced :-
RULE 6. Obligation of a manufacturer or producer of final products and a provider of output service. -
(1) The CENVAT credit shall not be allowed on such quantity of input used in or in relation to the manufacture of exempted goods or for provision of exempted services, on input service used in or in relation to the manufacture of exempted goods and their clearance up to the place of removal 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 used in the manufacture of goods cleared without payment of duty under the provision of that rule. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or 6 services, then, the manufacturer or provider of output service shall maintain separate accounts for -
(a) the receipt, consumption and inventory of inputs used -
(i) in or in relation to the manufacture of exempted goods;
(ii) in or in relation to the manufacture of dutiable final products excluding exempted goods;
(iii) for the provision of exempted services;
(iv) for the provision of output services excluding exempted services; and
(b) the receipt and use of input services -
(i) in or in relation to the manufacture of exempted goods and their clearance up to the place of removal;
(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance up to the place of removal;
(iii) for the provision of exempted services; and
(iv) for the provision of output services excluding exempted services,and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b).
(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow any one of the following options, as applicable to him, namely :-
(i) pay an amount equal to six per cent. of value of the exempted goods and exempted services; or
(ii) pay an amount as determined under sub-rule (3A); or
(iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of said clause (a) and pay an amount 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 he 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 :7
Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (z) shall be an amount equal to 2 per cent. of value of the exempted services.
Explanation. I. - If the manufacturer of goods or the provider of output service, 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 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 relation to the manufacture of exempted goods and their clearance up to the place of removal or for provision of exempted services.
Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (i) shall be an amount equal to 2 per cent. of value of the exempted services.
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 and input services used exclusively for the manufacture of exempted goods or provision of exempted service." 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 option under this clause is exercised or proposed to be exercised;
(iii) description of dutiable goods or output services;8
(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 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 output 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 and their clearance up to the place of removal 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 removed during the preceding financial year, F denotes total value of output and exempted services provided, 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;
(c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :-
(i) the amount of CENVAT credit attributable to inputs used, in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H;
(ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured 9 and removed plus the total value of output services provided plus the total value of exempted services provided, during the financial year and L denotes total Cenvat credit taken on inputs during the financial year minus H;
(iii) the amount attributable to input services used in or in relation to manufacture of exempted goods and their clearance up to the place of removal or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of output and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N 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 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 conditions (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), along with the date of payment of the amount short- paid,
(iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and
(v) credit taken on account of excess payment, if any, determined as per condition (f);
(h) where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in 10 condition (b), due to reasons that no dutiable goods were manufactured and no output service was provided in the preceding financial year, then the manufacturer of goods or the I of output service is not required to determine and pay such amount provisionally for L, month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year;
(i) where the amount determined under condition
(h) is not paid within the said due date i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty-four per cent.
per annum from the due date till the date of payment.
From the reading of Rule 6(1), it is clear that only in respect of input or input service used in exempted goods are not allowed. That means input or input service used in taxable service/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) 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.
9. An amendment made in Rule 6(3A) by Notification No. 13/2016-C.E. (N.T.), dated 1-3-2016. The amended sub-rule (3A) of Rule 6 of Cenvat Credit Rules, 2004 is reproduced below :-
Sub-rule (3A) as per Notification No. 13/2016-C.E. (N.T.), dated 1 Mar., 2016
(d) for sub-rule (3A), the following sub-rule shall be substituted, namely :-
"(3A) For determination of amount required to be paid 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 :-11
(a) 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 number 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 inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services and description of such exempted goods removed and such exempted services provided;
(iv) description of inputs and input services used exclusively in or in relation to the manufacture of non-
exempted goods removed or for the provision of non- exempted services and description of such non- exempted goods removed and non-exempted services provided;
(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 final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub- clauses (i) and (iv), namely :-
(i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid;
(ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services shall be called eligible credit, denoted as 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 12
(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 shall be deemed to be fifty per cent. of the common credit;
(v) remainder of the common credit shall be called eligible common credit and denoted as G, where, -
G = C - D. Explanation. - For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit;
(vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at the rate of fifteen per cent. per annum.
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 sub-rule (3A) shall have retrospective effect being clarificatory."
4.2 On the other hand, Ld. DR was unable to distinguish the order/decision relied on by the Ld. Advocate and nor did he file any contrary order/decision in his support. In view of the 13 forgoing, I hold that the impugned order to the extent it is contested before me is liable to be set aside and accordingly set aside, the appeal is allowed with consequential relief, if any, as per law.
(Operative part of the order pronounced in the Open Court) (P.DINESHA) JUDICIAL MEMBER BB