P. Venkata Subba Rao ORDER
P. Venkata Subba Rao, Member (T)
1. All these appeals involve the same issue in respect of the same appellant and hence are being disposed of together.
2. Heard both sides and perused the records. The appellant herein is a manufacturer of air conditioners and refrigeration products. They also undertake works contract service, erection commissioning and installation service, maintenance and repair service, business auxiliary services and goods transport agency services and have been registered with the service tax department. They availed CENVAT credit on various inputs, input services and capital goods. Some of these services are also used by them for trading activity. Apart from manufacture and the aforesaid services, the appellant also sells air conditioners and this trading activity was considered by the department as an exempted service. Since the appellant had availed CENVAT credit on input services which went into trading activity, the department raised demand on the appellant for various periods from September 2004 to March 2011 in four show-cause notices alleging that they have irregularly availed CENVAT credit in violation of Rule 6(3) of the CENVAT Credit Rules by using the CENVAT availed input services in rendering an exempted service namely trading.
3. During the relevant period, any person availing input and input services used for manufacture of dutiable and exempted final products to provide taxable as well as exempted services had the following options:
i. Under Rule 6(1) they could not avail CENVAT credit on the inputs or input services which are used in manufacture of exempted goods or for providing input services.
ii. Under Rule 6(2) where a manufacturer or provider of output services availed CENVAT credit in respect of any inputs or input services and manufactures final products or provides services which are chargeable to duty or tax as well as exempted, then the manufacturer or provider of output service had to maintain separate accounts for receipt, consumption and inventory of inputs and input services meant for use in the manufacture of dutiable final products or in providing taxable output services and the quantity of inputs for use in manufacture of exempted goods or services and take CENVAT credit only on that quantity of inputs or input services which are intended for use in the manufacture of dutiable goods or in providing taxable output services.
iii. If the manufacturer/service provider is neither able to follow Rule 6(1) or Rule 6(2) then under Rule 6(3) they had an option which states that "notwithstanding anything contained in sub-rule (1) and (2), a manufacturer or the provider of output service opting not to maintain separate accounts shall follow either of the following conditions as applicable to him namely:
(a) ....
(b) ....
(c) The provider of output service shall utilise credit only to the extent of an amount not exceeding 20% of the amount of service tax payable on taxable output services. Subsequently, by Notification No. 13/2016 : MANU/EXNT/0017/2016 dated 1st March 2016 explanation 3 has been inserted in Rule 6(1) as follows:-
"For the purposes of this rule, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a 'service' as defined in section 65B(44) of the Finance Act, 1994"
4. It is undisputed in this case that the appellant has be........