02 August, 2015

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Various Option Available to Assessee under Rule 6 of Cenvat Credit

If option not availed under Rule 6 of Cenvat Credit Rules, 2004 still assessee can avail any option and 5%/6% is not automatically implied option

“If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee.” – Tribunal


2015 (8) TMI 24 - CESTAT MUMBAI

M/s. Mercedes Benz India (P) Limited Versus Commissioner of Central Excise, Pune-I

Appeal No. E/85725/13-MUM

Dated - 16 July 2015

Judgment / Order

P. K. Jain, Member (T) And Ramesh Nair, Member (J),JJ.

For the Appellant : Shri V. Sridharan, Sr. Adv

For the Respondent : Shri Hitesh Shah, Commissioner (A.R.)

ORDER

Per: Ramesh Nair

The appeal is directed again Order-in-Original No. 38/RKS/CEX/P-I/2012 dtd. 14/11/2012 passed by the Commissioner of Central Excise, Pune-I, wherein Ld. Commissioner passed following order:

26.1 I confirm the demand of ₹ 24,71,93,529/- against the assessee i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune, in terms of Explanation-III to sub rule (3D) of Rule 6 of Cenvat Credit Rules, 2004 read with Rule 14 ibid and Section 11A(1) of the Central Excise Act, 1944. I further order appropriation of an amount of ₹ 4 ,06,785 /- already paid by the assessee vide Service Tax Cenvat Debit Entry No. 69 dated 13/3/2012 against the aforesaid demand.

26.2 I order recovery of interest on the amount of demand confirmed in Para 26.1 above, under the provisions of Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AA of the Central Excise Act, 1944. I further order appropriation of the amount of ₹ 20 ,993 /- already paid by the assessee vide PLA Entry No. 273, dated 13/3/2012 against the aforesaid demand of interest.

26.3 I further impose a penalty of ₹ 24 ,71,93,529 /- on the assessee, i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune under the provisions of Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

27. I give an option to the assessee i.e. M/s. Mercedes Benz India (P) Ltd. Chakan, Pune under Section 11AC(1)(C) of Central Excise, Act, 1944, to pay 25% of the penalty amount as imposed in para 26.3 above, provided the assessee pays the entire amount of demand confirmed in para 26.1 above, alongwith interest payable thereon as ordered in para 26.2 above as well as the reduced 25% penalty imposed under Section 11AC ibid, within thirty days of the date of communication of this order.

2. The fact of the case is that appellant, M/s. Mercedes Benz India (P) Ltd. are engaged in the manufacture of motor vehicle i.e. passenger cars falling under Chapter 87 of the Central Excise Tariff Act, 1985. They are also engaged in the trading activity of similar goods alongwith their motor vehicle in the same premises. In case of trading activity, the appellant imports cars directly from Daimler Chrysler, Germany.

2.1 In terms of the order received from their dealer network and sell the same to different customers. The appellant maintains common balance sheet for their manufacturing as well as trading activity. The appellant availed Cenvat credit under Cenvat Credit Rules, 2004 on input and input services used in relation to the manufacture of finished goods. The appellant vide their letter dated 28/3/2012 intimated that in the year 2011-12 (April 2011 to Feb 2012), value of the clearances by their manufacture unit was ₹ 1218 ,48,41,983 /- and value of clearances on account of trading was ₹ 494,38,70,577/-. It was observed that during the said period the appellant had used the input services such as Advertisement services, Air Travel Agent services, Business Auxiliary Services, Club and Association Services, Commercial and Training and Coaching Services, Information Technology Services for both their manufacture activity as well as trading activity and had availed credit on input services amounting to ₹ 4,99,92,897/-. On inquiry by the department with the appellant, it was noticed that the appellant availed credit on the input services which are used in relation to the goods manufactured by them cleared on payment of duty as well as motor vehicle imported as such and traded in the domestic market.

2.2 The appellant neither maintaining separate records for receipt and consumption of common services used for manufacture dutiable goods and provisions for exempted services viz. trading nor they are restricting availment of credit to the extent of input services used in manufacture of dutiable goods. The appellant have, according to the method of calculation provided vide sub rule 3A(b) of the Rule 6 of CCR, 2004 read with clause (c) of explanation-1 provided below sub rule (3D) of the said rule on their own accord calculated and reversed Cenvat credit amounting ₹ 4,06,785/- vide service tax Cenvat debit entry No. 69/13.03.2012 and paid interest @18% amounting to ₹ 20,993/- under section 75 of the Finance Act, 1994 vide PLA entry No. 273/13.03.2012 and intimated the same vide their letter dated 14/3/2012.

2.3 The show cause notice was issued wherein it was alleged that the appellant while reversed the amount of Cenvat Credit and paying the interest had not followed the procedure as laid down in sub rule 3A (a) and (b) of the said rules respectively, inasmuch as they had neither exercised these option by intimating the same in writing to the superintendent of central Excise giving required particulars nor have they determined and paid any amount provisionally for every months. Further this amount cannot be treated as final determination of the whole financial year as envisaged under sub rule 3A(c) of the said rule. Thus by not following laid down procedure as envisaged under sub rule 3A(c) of the said rule the appellant becomes liable to calculate and pay amount equivalent to 5% of the value on exempted services.

2.4 In view of the above allegation show cause Notice No. 35/P-V/R-CKN/COMMR/2012 dated 13/4/2012 proposed demand of ₹ 24,71,93,529/- which is equivalent to 5% of the value of traded goods i.e. ₹ 494,38,70,577/- on exempted services i.e. trading activity of the motor vehicle. It was also proposed to adjust an amount of 4 ,06,785 /- already paid by the appellant. In addition interest under Section 11AA was proposed to be imposed and amount of ₹ 20 ,993 /- was proposed to be adjusted against the demand of interest. Penalty under Rule 15(2) of CCR Rule, 2004 with read Section 11AC was also proposed to be imposed. Show cause notice was adjudicated by Ld. Commissioner wherein all the charges proposed in the show cause notice have been confirmed vide the impugned order dated 16/11/2012 therefore the appellant is before us.

3. Shri V. Shridharan, Ld. Sr. Counsel for the appellant made following submissions:

(a) There is no dispute that while availing Cenvat credit appellant have availed Cenvat credit strictly as per the provisions made in the Cenvat Credit rules inasmuch as services which are input services as defined under 2(l) of the CCR, Rules. The show cause notice also not raised dispute on the correct availment of Cenvat Credit. In the show cause notice the Revenue is restricted to denial of proportionate credit attributed to trading activity. Proportionate credited attributed to trading activity. Proportionate credit attributable to the manufacturing activity is not under dispute. In this admitted factual position the department could not proceed beyond the rules to demand and recover aforesaid credit which is admittedly against the provisions and there are no provisions in law, which authorizes such demand and recovery. Hence, impugned order demanding an amount for which no Cenvat credit was availed is liable to be set aside.

(b) In the amendment to Rule 2(e) of the CCR vide Notification No. 3/2011-CE (NT) dated 1/3/2011 by an explanation trading activity was included in the definition of exempted services w.e.f. 1/4/2011 thus w.e.f. 1/4/2011 the appellant was liable to reverse the Cenvat Credit availed on account of input and input services, which are used in the providing exempted services in terms of Rule 6(i) of CCR, 2004. As per the provision of Rule 6(i) the appellant is not entitle to avail Cenvat Credit in respect of input services used in the trading activity. Since the input services used both for manufacture as well as trading, appellant was liable to reverse Cenvat Credit on inputs services attributable to the trading activity i.e. exempted services. Appellant calculated reversal amount on their own in the month of February, 2012 and reverse the said amount on 13/3/2012 and interest of ₹ 20 ,993 /- was also paid on 13/3/12. Reversal of the credit was intimated to the department vide letter dated 14/3/2012. Ld. Commissioner, without considering ratio of turnover from manufacturing activity vis a vis trading activity has merely confirmed the demand at 5% of the total exempted turnover i.e. trading of imported cars which cannot be sustained and being completely perverse the impugned order is liable to be set aside.

(c) Ld. Commissioner confirmed the demand equivalent to the 5% of the trading turnover despite admitting the fact that the appellant have reversed the required credit alongwith interest, mainly on the ground that appellant have not complied with the condition and procedure laid down under Rule 6(3)(ii) read with rule 6(3A) of CCR, Rules. The appellant submits that they have correctly exercised the option under Rule 6(3A) for reversing the credit under Rule 6(3)(ii). As per sub rule (3A) the assessee is required to intimate while exercising the option provided under Rule 6(3)(ii) to the Jurisdictional superintendent and the intimation should contain the prescribed particulars specified under clause (a) of sub rule (3A) of Rule 6 of CCR, 2004. The clause (a) nowhere specified that the manufacturer or provider of out put service shall exercise such option at the beginning of the financial year for which option to be exercised. The provisions does not debar a manufacturer or provider of output service from exercising option in the middle of the year. In fact Rule 6 (3A)(a)(ii) states that manufacturer ought to mention date from which the option under this clause is exercised or proposed to be exercised. Thus Rule itself contemplates a situation where the declaration is filed by the manufacturer after they have exercised option. Therefore contention of the Ld. Commissioner that option to make payment under Rule 6(3)(iii) required to be exercised by the appellant in the beginning of the financial year is incorrect and without any legal basis. Rule 6 (3A)(b)(iii) merely provided for provisional amount of Cenvat credit to be reversed on monthly basis. The said amount is only a provisional amount. If the manufacturer / provider of output service has failed to make the payment provisionally or there is short payment in any month then manufacturer / provider of out service is liable to make final payment on 30 th June of succeeding financial year alongwith interest as provided in clause (d) and clause (e) of sub rule (3A).

(d) In The present case the appellant have correctly exercised the option under Clause (a) of sub rule (3A) and also reversed the credit alongwith interest, thus compliance of the procedure as laid down under rule 6(3A) was made. It is further submitted that as regard the intimation to the superintendent and information contained therein, the information which required to be furnished in the intimation are name and address, registration number of the manufacturer of goods, date from which option under this clause is exercised, description of dutiable goods or output service, description of exempted goods or services and Cenvat credit of input and input services lying in balance as on date of exercising the option. These informations directly or indirectly were furnished and were available with the department. Since the appellant is registered manufacturer and filing their monthly ER1 return, the name, address and registration number is right from the date of registration is available with the department. As regard the date of option, the appellant while reversing the credit under an intimation to the department clearly shown that date of option is from 1 st April 2011, description of dutiable goods and exempted goods have also been intimated to the superintendent.

(e) As regard the Cenvat Credit of input and input services lying in balance, the same has been declared by the appellant in their monthly ER1 return. Therefore, even if it is assumed, that these information have not been intimated to the superintendent under intimation the same were otherwise available with the department at all the time. Moreover the intimation has been given by the appellant vide their letter dated 14/3/2012, therefore, even if the intimation in the prescribed format was not given but information required therein was otherwise very much provided to the jurisdictional Central Excise authority. In view of this fact, it cannot be said that the appellant have not complied with the procedure as laid down. It is the submission of the Ld. Counsel that is not provided under the law that if there is any procedure infraction in availing the option of Rule 6(3)(ii), the option provided under Rule 6(3)(i) shall automatically apply. Two options have been provided under the law to the assessee. It is a choice of the assessee which option to be availed. In the present case, the appellant admittedly availed optioin available under rule 6(3)(ii) read with rule 6(3A), therefore Revenue cannot insist to avail the option of Rule 6(3)(i) and demand huge amount of money which is otherwise not payable by the appellant, nor it is part of Cenvat Credit availed by the Appellant. He submits that when the options have been provided, the department has no say for choice of the assessee, the assessee who has liberty to choose any of the option and therefore in the appellant case, the appellant has opted for option available under rule 6(3)(ii) of Cenvat Credit Rules, therefore department has no role to decide regarding any other option available in these rules. He also refers the adjudication order passed by the same Jurisdictional Commissioner vide Order-in-Original No. P-I/COMMR/ST/09/2011 dated 28/10/2010 in respect of M/s. Tata Technologies Ltd. wherein involving identical facts, the Commissioner has dropped the proceedings of the show cause notice. The said order was accepted by the Revenue and no further appeal was filed there against. He submits that in the same Commissionerate two different yardstick cannot be followed for two different assessee. For this reason also impugned order is incorrect and illegal.

4. Shri. Hitesh Shah, Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that under rule 6(3), following options are available:

(i) Pay an amount equal to five per cent of the exempted goods and exempted service; or

(ii) Pay an amount as determined under sub-rule (3A);

As per clause (i) the assessee is required to pay 5% of the value of exempted goods, in clause (ii) assessee is required to pay equal amount of Cenvat Credit on input and input services used in relation to the exempted services subject to condition and procedure specified in sub rule (3A). The appellant claimed that they have opted option provided under sub clause (ii) of the Rule 6(3) of CCR, 2004. The said option is available only when the condition and procedure specified in sub-rule (3A) is complied with. In the present case the appellant paid the amount of Cenvat credit attributable to the input services used in exempted services i.e. trading of motor vehicle but procedure was not followed inasmuch as in the beginning of the financial year, have not intimated in writing to the Jurisdictional superintendent regarding the availment of the option provided under clause (ii) of Rule 6(3). They have not furnished the information as provided under clause (i) to (v) of sub clause (a) of Rule 6(3A).

4.1 The appellant failed to calculate Cenvat credit to reversed on monthly basis, therefore the substantive requirement of procedure was not followed. It was time and again held by the Apex court that in order to avail any benefit provided under the statue, procedure and conditions prescribed thereto should be scrupulously followed and in absence of compliance of condition and procedure, the appellant renders themselves disentitle for the benefit of option provided under rule 6(3)(ii). Once the appellant became disentitle for this option, the other option available is under rule 6(3)(i), therefore appellant had no option except to follow the provision of Rule 6(3)(i) and accordingly they were required to pay 5% of the value of the exempted services (trading of cars).

4.2 Ld. A.R. in support of his submission that procedure must be scrupulously followed, else benefit provided under law, the benefit cannot be extended. He placed reliance on following judgments:

(a) Commissioner of C.Ex. Ahmedabad Vs . Ramesh Food Products [2004 (174) E.L.T. 310 (S.C.)]

(b) Kamani Foods Vs . Collector of Central Excise, Patna [1995 (75) E.L.T. 202 (Tri) ]

(c) Eagle Flask Industries Limited Vs . Commissioner of C.Ex. Pune [2004 (171) ELT 296 (S.C.)]

(d) Golden Dew Tra Factory Vs . Commissioner of C.Ex. Coimbatore [2009 (15) S.T.R. 358 (Tri. Chennai)]

(e) Kaikatty Indus. Co-op. Tea Factory Ltd. Vs.Commr. of C.Ex. Salem [2010 (261) E.L.T. 339 (Tri. Chennai)]

(f) E.P. Electropressings Pvt. Ltd. Vs . Commissioner of C.Ex. Delhi-II [2002 (140) E.L.T. 230 (Tri. Del.)]

(g) Mihir Textiles Ltd. Vs.Collector of Customs, Bombay [1997 (92) E.L.T. 9 (S.C.)].

(h) Assam Tubes Ltd. Vs . Commissioner of C.Ex. Shillong [2014 (313) ELT 746 (Tri. Kolkata)]

(i) Madras Cements Ltd. Vs . Commissioner of Central Excise, [2010 (254) ELT 3 (S.C.)]

(j) R.R. Paints Pvt. Ltd. Vs . Commissioner of Central Excise, Mumbai [2013 (288) E.L.T. 289 (Tri. Mumbai)]

(k) Commissioner of C.Ex. Thane- Vs. Nicholas Piramal (I) Ltd. [2009 (244) ELT 321 (BOM.)]

(l) Union of India Vs . Supreme Steels and General Mills [2001 (133) ELT 513 (SC)]

(m) Commissioner of C.Ex. & Customs Vs . Venus Castings p) Ltd. [2000 (117) ELT 273 (S.C.)]

5. We have considered the submissions made by both sides. From the facts and circumstances of the case and arguments put forth by rivals, we find that the issue to be decided by us is whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rule 6(3A) alongwith interest following the option available under Rule 6(3)(ii). Provisions for payment of 5% of the sale value of exempted goods is provided as one of the option given in Rule 6(3) of Cenvat credit Rules which is reproduced below:-

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, or input service used in or in relation to the manufacture of exempted goods and their clearance upto 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 are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.

[Explanation 1 . - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory.

Explanation 2 . - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder.]

[(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 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 upto the place of removal;

(ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto 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 five 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 subclauses (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 subclauses (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 percent.] of the value so exempted]

[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.

Ld. Adjudicating Authority demanded 5% of the total sale of the trading turnover of goods on the ground that option provided under Rule 6 (3) (i) is applicable on the ground that claim of the appellant on the option provided under Rule 6(3)(ii) is not available for the reason that appellant has not complied with condition provided under sub Rule (3A) of Rule 6 which provides that manufacturers of the goods shall follow certain procedure and conditions as provided under Sub Rule (3A)(a) (i) to (iv) inasmuch as the appellant have not given said information in writing to the Jurisdictional Superintendent of Central Excise. Secondly the appellant, as provided under Clause (b) of sub rule (3A) have not paid the amount of Cenvat on monthly basis and paid after almost 11 months.

5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided:-

(i) Payment of 5% on value of exempted services.

(ii) Payment of an amount equal to the Cenvat Credit amount attributed to input services used in or in relation to manufacture of exempted goods or provision of exempted services as provided under sub rule (3A) (b).

It is observed that the appellant has availed the option provided under sub rule (3)(ii) of Rule 6 and paid an amount as per sub rule (3A) alongwith interest and intimated the same to the jurisdictional superintendent in writing vide letter dated 14/3/2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit which they have made alongwith interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2012, in accordance to which, the appellant are supposed to an amount equivalent to Cenvat Credit on input services attributed to the exempted service in terms of Rule 6(3A). In the present case, the appellant has availed Cenvat Credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to Cenvat Credit which is attributed to the input service used for exempted service i.e. sale of car. In our view, three options have been provided under rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub rule (3) (ii), we find that foremost condition is that the appellant is required to pay an amount as per the formula provided under sub rule (3A) on monthly basis. However, we find that as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under Rule (3A) of Rule 6, therefore to fulfil the condition, assessee should pay the said amount, which has been complied by the appellant.

5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the compliance as provided under Clause (a) of Sub Rule (3A) of Rule 6 the appellant while exercising this option is required to intimate in writing to the Jurisdictional Superintendent, Central Excise, 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 exeertised or proposed to be exercised;

(iii) Description of dutiable goods or taxable services;

(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.

As per the submission of the appellant and perusal of their letter alongwith enclosed details, it is found that more or less all these particulars were intimated to the Jurisdictional Superintendent. The appellant has been filing their returns regularly on monthly basis to the department. On perusal of the copies of the such return submitted alongwith appeal papers, it is observed that the particulars, as required under clause (a) of sub rule (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6(3A), it stood made.

5.3 As regard the contention of the adjudicating authority that this option should be given in beginning and before exercising such option, we are of the view that though there is no such time limit provided for exercising such option in the rules but it is a common sense that intention of any option should expressed before exercising the option, however the delay can be taken as procedural lapse. We also note that trading of goods was considered as exempted service from 2011 only, thus it was initial period. We are also of the view that there is no condition provided in the rule that if a particular option, out of three options are not opted, then only option of payment of 5% provided under Rule 6(3)(i) shall be compulsorily made applicable, therefore we are of the view that Revenue could not insist the appellant to avail a particular option. In the present case admittedly it is appellant who have on their own opted for option provided under Rule 6(3)(ii). The meaning of the option as argued by the Ld. Sr. Counsel is that “option of right of choosing, something that maybe or is chosen, choice, the act of choosing”. From the said meaning of the term ‘option', it is clear that it, is the appellant who have liberty to decide which option to be exercised and not the Revenue to decide the same.

5.4 We find that the appellant admittedly paid an amount of ₹ 4 ,06,785 /- plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of ₹ 24,71,93,529/- of the total value of the vehicle amounting to ₹ 494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee.

5.5 As discussed above and in the facts of the case that actual Cenvat credit attributed to the exempted services used towards sale of the bought out cars in terms of Rule 6(3A) comes to ₹ 4,06,785/- where as adjudicating authority demanded an amount of ₹ 24,71,93,529/-. In our view, any amount, over and above ₹ 4 ,06,785 /- is not the part of the Cenvat Credit, which required to be reversed. The legislator has not enacted any provision by which Cenvat credit, which is other than the credit attributed to input services used in exempted goods or services; can be recovered from the assessee.

5.6 We have gone through judgments relied upon by the Ld. A.R. In the arguments, we found that as regards the judgments on the issue of availment of Cenvat credit on the input or input services used in dutiable and exempted goods, the provision involved in the present case i.e. rule 6(3) (i) (ii) (3A) has not been considered in the relied upon judgments, therefore the same are not applicable. As regard the other judgements, all these judgments having different facts and dealing with other provisions such as SSI exemption, exemption notification, etc., which are not identical to the fact of the present case. Moreover, in the present case the substantive provisions under Rule 6(3)(ii) and sub rule (3A) i.e. payment of equivalent to the Cenvat credit, which the appellant have complied with and if at all there is delay, the required interest has also been paid, therefore in the present case, there is no case of noncompliance of procedure and condition. Therefore the judgments cited by the Ld. A.R. are not applicable.

6.1 In view of these observations, we are of the considered view that that demand confirmed by the adjudicating authority has no legs and therefore the same can not be sustained. The impugned order is set aside and Appeal is allowed.

Order pronounced in Court on 16/7/15.

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