By TIOL News Service

MUMBAI, DEC 30, 2013: THE applicants are manufacturers of goods falling under Ch. 84 and also providing services such as consulting engineering services, erection, commissioning and installation service, management, maintenance and repair service etc. The applicants are not maintaining separate account for their manufacturing activity as well as service activities and also not maintaining separate account for taxable as well as exempted goods or exempted services. Revenue is of the view that the appellant are required to reverse 5%/6% of the goods/services(exempted during the impugned period) as per Rule 6(3)(i) of CCR, 2004.

Accordingly, a demand of 5% of the value of the exempted services and which came to Rs.11,56,09,971/-was confirmed.

Before the CESTAT with an application for stay, the applicant submitted that the applicant has followed the procedure as per Rule 6(3) of the CCR, 2004 inasmuch as they have reversed 5% value of the exempted goods. But for exempted service they followed sub-rule 3A of Rule 6(3) of CENVAT Credit Rules, 2004, and accordingly they reversed a sum of Rs.95,77,184/- attributable to exempted services. As the said facts have been intimated to the revenue, the demand is unsustainable, the applicant submitted.

The Revenue representative opposed the contention of the applicant and while justifying the demand submitted that as per Rule 6(3)(i) of CCR,2004 they are required to pay 5% of the value of the exempted goods and exempted services and if they are not following this Rule, they can opt for Rule 6(3A) but they cannot opt for payment of exempted goods under 6(3)(i) and Rule 6(3A) for exempted services as per their choice.

The Bench observed -

"5. We do agree with the ld. AR. As per Rule 6(3) the applicant has to opt for Rule 6(3)(i) or Rule 6(3A). If they have opted to pay 5% value of the exempted goods as per Rule 6(3)(i), they cannot take option separately for exempted services as per Rule 6(3A). Therefore, applicants have failed to make a case for waiver of impugned demands. We do agree with the counsel for the applicant that the value prescribed as per Rule 6(3) of CENVAT Credit Rules, 2004 is sale price less cost price of goods which is Rs.73,43,01,782/-. The value of 5% of said amount roughly comes to Rs.3.5 crores."

Noting that the applicant had already paid an amount of Rs.95,77,184/-, the Bench directed the applicant to make a further deposit of Rs.2.50 crores and report compliance for obtaining stay in the matter.

(See 2013-TIOL-1927-CESTAT-MUM)