CA Nischal Agarwal

Reliance in this connection can be placed on the decision of Hon’ble CESTAT Mumbai in case of M/s Mercedes Benz India (P) Ltd vs CCEx [Appeal No E/85725/13-Mum] pronounced on 16-07-2015 wherein the appellant is a manufacturer of motor vehicle as well as engaged in trading of goods. The appellant maintained common books for their manufacturing as well as trading activities and CENVAT Credit on input services were availed in terms with Rule 2(l) during the FY 2011-12 without any reversal as required under Rule 6 for common input services.

The appellant suo moto reversed CENVAT Credit availed in proportion to their trading activities along with payment of interest in the month of March’2012 for the FY 2011-12 as per the dictates of Rule 6(3A) of CCR’04 and the same was duly intimated to the department. The department however raised show cause alleging that the company has not followed the procedures such as intimating the department about the option exercised and they have not paid any amount provisionally every month. On the basis of afore-said observations, the department asked the appellant to pay 5% of the value of exempt services and disallowed the method adopted for computing reversal [proportionate reversal as per Rule 6(3A)] by the appellant.

The Ld. Counsel for the appellant submitted that there was due compliance of the provisions of the law as it requires that the option exercised or proposed to be exercised must be intimated to the department. Thus, the intimation by the appellant after the said option under Rule 6(3)(iii) is being exercised in compliance with the provision of the law.

Hon’ble Tribunal held that the non-compliance of the procedures is only a procedural lapse and can be condoned. Further, it was observed that the department cannot force the assesse to exercise a particular option for any such procedural lapse. Since the appellant has suo moto made such reversal of CENVAT Credit along with interest thereon, the objective of the said rule has been complied with. It was held that the demand raised by the adjudicating authority has no legs and therefore cannot be sustained.

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June 2021