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CESTAT : Rule 6 credit reversal declaration directory; Cannot negate exemption for minor procedural lapse

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CESTAT finds no fault in reversal of proportionate input services credit attributable to exempted output services in exercise of option under Rule 6(3)(ii) of CENVAT Credit Rules (CCR), despite belated filing of declaration prescribed under Rule 6(3A)(a);

Rejects Revenue’s stand that belated exercise of such option amounts to not exercising the option at all and hence, assessee liable to pay amount equal to 6% / 8% of value of exempted services under Rule 6(3)(i); Holds that condition of filing declaration is only directory, not mandatory and as has been held by Rajasthan HC in Grasim Industries Ltd, in case of substantive compliance by assessee i.e. calculation of CENVAT credit reversible on annual basis and payment thereof before prescribed date, substantial benefit cannot be denied;

Notes Adjudicating Authority’s observation for subsequent period that intention of legislature is only to deny undue benefit in form of CENVAT credit which is attributable to exempted output services, minor procedural lapses cannot deny assessee substantial benefit;

Observes, in the garb of Rule 6, provisions of Sec 93 of Finance Act cannot be overridden and / or exemption provided thereunder cannot be negated by CCR, which is a delegated legislation and subservient to main Act  : Mumbai CESTAT

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