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E/51303/2019 with E/Cross/50043/2020 E/50236/2020

(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

banking financial company, engaged in providing services by way of extending deposits, loans or advances, in addition to options given in sub-rules (1), (2) and (3), shall have the option to pay for every month an amount equal to fifty per cent. of the CENVAT credit availed on inputs and input services in that month.] 3(3C) * * (3D) Payment of an amount under sub-rule (3) shall be deemed to be CENVAT credit not taken for the purpose of an exemption notification wherein any exemption is granted on the condition that no CENVAT credit of inputs and input services shall be taken. Explanation I. - "Value" for the purpose of sub-rules (3) and (3A), --

29. In this formula, there is no dispute regarding the values of M (the value of exempted services and exempted goods) and N (total of exempted and non-exempted services and dutiable and exempted goods). The dispute is regarding ‗P' which, according to the Revenue, is ‗the total CENVAT Credit taken on input services', i.e., it should include not only the 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 E/51303/2019 with E/Cross/50043/2020 E/50236/2020 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.

32. We concur with a similar view taken by a coordinate Bench at Ahmedabad in Reliance Industries Paragaph 8 of the decision is reproduced below:

―8. 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 E/51303/2019 with E/Cross/50043/2020 E/50236/2020 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 dutiable goods, shall stand disallowed, which is not provided under any of the Rule of CENVAT Credit Rules, 2004.