Order Date: 14 November 2022

Facts:

• The appellant, GE Power India Limited, is engaged in manufacturing and trading activity.
• The appellant have availed Cenvat Credit on the Input and input services during the relevant period, and it was alleged that they are also engaged in the activity of trading of goods and common input services have been used in the manufacture of excisable goods.
• A show-cause notices were issued during the period April 2011 to March 2017 to the appellant for recovery of 5%/ 6%/ 7% of the value of exempted service i.e. traded goods in accordance with Rule 6(3)(i) of the Cenvat Credit Rules, 2004 as amended.
• The appellant failed to maintain separate accounts to utilize the cenvat credit in the activity of manufacture of goods, providing taxable services and taxable activity and of exempted services i.e. trading activity.
• Hence, the present appeals.

Issue:

• Whether the appellant is eligible for recovery of 5%/ 6%/ 7% of the value of exempted service i.e. traded goods in accordance with Rule 6(3)(i) of the Cenvat Credit Rules, 2004.

Order:

• The Tribunal find that in the present matter appellant admittedly reversed the proportionate Cenvat Credit attributable to the trading activity/ exempted service, this is not under dispute.
• The authorities observed that 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, 2004 therefore demand of huge amount on the total value of the trading activity @ 5% / 6%/ 7% cannot be demanded.
• The authorities also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amounts from the assessee. 
• 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%/ 6%/ 7% will automatically and by default be applied.
• The appellant has not categorically agreed for the reversal of Cenvat credit by way of opting for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should only be followed by the Appellant.
• The impugned orders demanding an amount equal to 5%/ 6%/ 7% are set aside and the matters are remanded to the adjudicating authority to verify and pass a fresh order regarding the correctness of proportionate credit to be reversed in this matter after giving a reasonable opportunity of hearing to the appellants.
• The appeal is allowed.