Whether assessee can opt for payment under Rule 6(3) in respect of common input services related to past period?

PJ/CASE LAW/2016-17/3070

Case-INOX LEISURE LIMITED Versus COMMISSIONER OF C. EX. & S.T., VADODARA-II

Citation-2016 (41) S.T.R. 102 (Tri. - Ahmd.)

Brief Facts-The issue involved in the present proceedings is that appellant is providing dutiable and exempted services and also avails Cenvat credit on certain common input services. Appellant vide letter dated 21-4-2009 opted for payments at prescribed percentages on the value of exempted services under Rule 6(3) of the Cenvat Credit Rules,.2004 and also paid amounts for the earlier periods 2008-09 and 2009-10. First appellate authority has rejected appellant’s appeal only on the ground that an option given cannot be effective for the earlier period.
This appeal has been filed by the appellant against OIA No. PJ/441/VDR-II/2012-13, dated 12-2-2013 under which Commissioner (Appeals) Vadodara has upheld OIO No. D/STC/AC/AB/04/INOX/2011-12, dated 9-5-2011.

Appelants Contention-Shri Dhaval K. Shah (Advocate) appearing on behalf of the appellant argued that appellant is paying service tax on Business and Exhibition Services & Advertisement Sale of Space or time services. In addition to above services appellant is providing Screening of Movies and Sale of food items, which are exempted services. That common input services on which credit is taken are Advertisement charges, Lease rental charges, Housekeeping charges, Outsource labour charges, event maintenance, cash pick up charges, processing charges, Internet excess charges, prepaid expenses charges, audit charges, security charges, telephone charges, vehicle charges, etc. That appellant is not maintaining separate accounts for dutiable and exempted services as the same is not practically possible. That appellant has opted for 12% payment on the value of exempted services under Rule 6(3) of Cenvat Credit Rules, 2004. That such an exercise of option has not been prescribed to be given in writing to the Department. That appellant has never opted out of this option for the entire period 2008-2009 and 2009-2010. It was the case of the learned Advocate that first appellate authority has wrongly come to the conclusion in Para 5.3 of the OIA dated 12-2-2013 that appellant has changed the option once exercised. He relied following case laws in support of his arguments: -
(i)         Rochem Separation Systems (I) Pvt. Ltd. v. Commissioner of Central Excise, Thane-II [2013 (291)E.L.T.467 (Tri.-Mumbai) = 2013 (30)S.T.R.208 (T)].
(ii)        Dabur Pharma Ltd. v. Commissioner of Central Excise, Kolkata-I [2010 (262)E.L.T.275 (Tri. - Kolkata)].
(iii)       Foods, Fats &-Fertilizers Ltd. v Commissioner of Central Excise, Guntur [2011 (22)S.T.R.484 (Tri. - Bang.) = 2009 (247)E.L.T.209 (T)].
Learned Advocate also argued that appellant also followed C.B.E. & C. Circular 868/6/2008-CX, dated 9-5-2008 by correctly paying an amount with respect to percentage of value of exempted services.

Respondents Contention-Shri T.K. Sikdar (AR) appearing on behalf of the Revenue argued that appellant cannot exercise option retrospectively for the earlier period and hence credit taken was improper. He strongly defended the order passed by the lower authorities.
Reasoning Of Judgement-The appellant is providing dutiable and exempted services and also avails Cenvat credit on certain common input services. Appellant vide letter dated 21-4-2009 opted for payments at prescribed percentages on the value of exempted services under Rule 6(3) of the Cenvat Credit Rules,.2004 and also paid amounts for the earlier periods 2008-09 and 2009-10. First appellate authority has rejected appellant’s appeal only on the ground that an option given cannot be effective for the earlier period. It is observed from C.B.E. & C. Circular No. 868/6/2008-CX, dated 9-5-2008 that there are only following two procedures to be followed where Cenvat credit is taken for dutiable and exempted services :-
“(i) Pay an amount equal to 10% of the value of the exempted goods or 8% of the value of the exempted services. Exempted service includes non-taxable service also.
OR
(ii) Pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in or in relation to manufacture of exempted goods or for provision of exempted services. Rule 6(3A) prescribes the conditions and procedure to determine the amount of Cenvat credit attributable to exempted outputs. Schemes under Rule 6(3) are optional and each individual scheme is comprehensive and self-contained. An assessee can exercise the option in relation to all his activities as an assessee and the option is not available only in relation to a Part of his activity and the option once exercised cannot be withdrawn during the said financial year.”
There is no fact on record that appellant at any stage opted for opinion (ii) above. On a particular date he paid amounts @ prescribed as per option (i) above even for the past period. In the absence of any contrary fact it cannot be said that appellant changed the option in a financial year. Appellant has all through opted for payment of amounts as per prescribed percentage of the value of exempted services, may be at a later date. There is no bar for making payments as per prescribed percentages for the prior period also as it may not be feasible to segregate quantum of input service credit pertaining to dutiable and exempted services. Appellants action of paying amounts as per option (i) above for the past period is justified. Appeal filed by the appellant is allowed with consequential relief, if any. Miscellaneous application filed by the appellant is accordingly disposed of.

Decision-Appeal allowed

Comment-The analogy of the case is that the appellant is providing dutiable and exempted services and also avails Cenvat credit on certain common input services. Appellant has opted for payments at prescribed percentages on the value of exempted services under Rule 6(3) of the Cenvat Credit Rules,.2004 and also paid amounts for the earlier periods 2008-09 and 2009-10. Department has raised the objection on the ground that an option given cannot be effective for the earlier period.
The Tribunal held that the Appellant has all through opted for payment of amounts as per prescribed percentage of the value of exempted services, may be at a later date. There is no bar for making payments as per prescribed percentages for the prior period also as it may not be feasible to segregate quantum of input service credit pertaining to dutiable and exempted services. Hence assessee’s appeal is allowed.

Prepared By-Neelam Jain

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PJ/CASE LAW/2016-17/3070

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