Cenvat Credit Plea of Tata Steels allowed: CESTAT

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Judgement:

The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT) held that the appellant, Tata Steel, was entitled to avail option under Rule 6(3)(ii) of the Cenvat Credit Rules.

Facts of the case:

The appellant, M/s Tata Steel is a manufacturer of various types of dutiable iron and steel products, uses Several duty paid input materials and avails various input services, and availed and utilized Cenvat credit of duty or service tax paid thereon in terms of the Cenvat Credit Rules. Since the said duty paid input materials and input services are used both in or in relation to the manufacture of dutiable and exempted goods respectively, the appellant is required to follow the provisions of Rule 6 of the Cenvat Credit Rules.

Interpretation of law:

In terms of Rule 6(3)(ii) of the Cenvat Credit Rules, a manufacturer of goods or providers of output services who did not maintain separate accounts as provided for under Rule 6(2) of the Cenvat Credit Rules was given two options.

Firstly, in terms of Rule 6(3)(i) the manufacturer could make payment of an amount equal to 10% of the value of the exempted goods. Secondly, in terms of Rule 6(3)(ii) of the Cenvat Credit Rules the manufacturer of goods could opt for paying an amount equivalent to the Cenvat credit attributable to input and input services used in or in relation to the manufacture of the exempted goods subject to the conditions and procedure specified in Rule 6(3A) of the Cenvat Credit Rules.

According to the appellant the amended provision of Rule 6(3) along with Rule 6(3A) of the Cenvat Credit Rules coming into effect on and from April 1, 2008, the procedure which had to be followed as laid down in Rule 6(3A) required appreciation and working out before any option could be exercised by it and since this took some time, the appellant, in order that there is no contravention of the provisions of the Cenvat Credit Rules, continued to make payment as before, which was 10% of the value of the exempted goods, coal tar and CO gas as provided in the erstwhile Rule 6(3)(b) of the Cenvat Credit Rules for April 2008.

Conclusion:

The Range Superintendent, raised a dispute that since the appellant had deposited specified amount equal to 10% of the value of the exempted goods for April 2008, it had already exercised and availed option in terms of Rule 6(3)(i) of the Cenvat Credit Rules for the current financial year 2008-09 and hence could not withdraw the same and exercise option in terms of Rule 6(3)(ii) of the Cenvat Credit Rules.

The tribunal consists of Judicial Members, P.K. Choudhary, and Technical Member, P. Anjani Kumar held that the appellant had never exercised at any point in time during the period 2008-09 the option in terms of Rule 6(3)(i) of the Cenvat Credit Rules prior to May 2008.

“The Commissioner has therefore erred in holding that it is on record that the appellant had exercised the option under Rule 6(3)(i) of the Cenvat Credit Rules in the instant case,” the tribunal observed.

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