Option filed under Rule 6(3)(ii) of CCR, 2004 is effective only prospectively: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), noted that the option filed under Rule 6(3)(ii) of Cenvat Credit Rules (CCR), 2004 is effective only prospectively.

The issue in dispute as stated by the appellant,M/s. Sify Technologies Ltd, is whether retrospective effect can be given to the option filed by the taxpayer under Rule 6(3)(ii) of CENVAT Credit Rules, 2004. The Commissioner after having put the appellant to notice, came to the conclusion that as per a clear reading of the Statute the option filed by the appellant under Rule 6(3)(ii) of CCR, 2004 is effective only prospectively.

Rule 6(3A)(v) of CENVAT Credit Rules, 2004 stated that taxpayer desiring to avail the said option should declare the amount lying to the credit in the CENVAT account on the date of exercising the option. There is no scope for ambiguity while interpreting the words ‘on the date of exercising the option’ and the legislative intent in this regard is clear i.e. option exercised takes effect only from the date it is filed.

The Counsel for the appellant submitted that the statute envisages that the assessee reverses a proportionate amount of credit availed on common input services albeit upon due intimation to the department which they have done. Rule 6 does not stipulate any time limit within which the assessee must inform the department about exercising the option under Rule 6(3A) of CENVAT Credit Rules, 2004.

The Counsel for the Revenue argued that the option filed during October 2010 by the taxpayer under Rule 6(3)(ii) of CENVAT Credit Rules, 2004 can be held effective only prospectively.

The Coram comprising P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) noted that the sequence of Rule 6 and the procedure and conditions stated therein, clearly bring out that the assessee can only avail the facility under Rule 6 after following the provisions of the said Rule which should be as on the date of exercising the option. Hence a harmonious reading of Rule 6(3)(ii) and Rule 6(3A) of CCR, 2004 leads to the conclusion that the intimation given to the department is effective only prospectively.

The Bench further observed that allowing every assessee the freedom to make the declaration whenever he chooses, even retrospectively after the statutory monthly returns are filed and then reversing credit at will to claim compliance with the Rules will lead to lack of finality in assessments, encourage attempts to evade duty and create administrative difficulties in effectively monitoring and implementing the CENVAT scheme.

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