1. This appeal is directed against Order-in-Appeal No. AKP/187/ NSK/2011, dated 30-9-2011 in which Commissioner (Appeals) confirmed the demand of Rs. 26,487/- along with interest and penalty of Rs. 26,487/-under Rule 15(3) of the Cenvat Credit Rules. He reduced credit disallowed from Rs. 16,204/- to Rs. 13,187/-.

2. The appellant is a partnership firm of Chartered Accountant under the trade name of M/s. Rathi Daga. They provide services under the category of 'Practicing Chartered Accountant'. They rendered taxable as well as exempted services and utilised Cenvat credit on input services such as telephone services, insurance, repairs & maintenance of motor car etc. It was detected by Audit mat they did not maintain separate accounts for services used in providing taxable and exempted services as required under Rule 6(2) of the Cenvat Credit Rules. The appellant had two options under Rule 6(3) of the Cenvat Credit Rules either to pay an amount equal to 8% of the value of the exempted services or pay an amount equivalent to the Cenvat credit attributed to the input services used for providing the exempted services by following conditions and procedure of Rule 6(3A). As they did not follow the conditions of Rule 6(3A), a show cause notice was issued demanding Rs. 26,487/- being the amount equal to 8%/6% of the value of exempted services. Further, it was also noticed that they had availed and utilised Cenvat credit of Rs. 16,204/- on input services of insurance and maintenance of motor vehicles which were not in the name of the firm. The Commissioner (Appeals) upheld the demand order passed by the adjudicating authority to the extent mentioned above.

3. Heard both sides.

4. The learned C.A. stated that it was ignored by the adjudicating authority that they had paid proportionate of Cenvat credit of Rs. 927/- as required under Rule 6(3)(ii), on 6-5-2010, before the issue of show cause notice on 11-11-2010. Further, that the provisions of Rule 6(3A) are technical in nature and there is no time limit prescribed for giving option to avail Rule 6(3A). He also stated that Rule 6(3A) was amended from 1-4-2008 and they were ignorant about these provisions and continued to follow the old provision which restricted utilisation of Cenvat credit to the extent of 20%. Further, he contented that the input services of insurance and car are used for business and expenses are reflected in the Profit & Loss Account of the firm. Further that the Order-in-Original and Order-in-Appeal travelled beyond the show-cause notice to the extent that the show-cause notice only sought to deny credit on the bills which were not in the name of the firm. Lastly he stated that extended period of limitation cannot be invoked in the absence of mens rea and relied on Hon'ble High Court of Karnataka judgment in the case of CCE&ST v. Adecco Flexione Workforce Solutions Ltd. .

5. The learned A.R. reiterates the findings of the Commissioner.

6. I have carefully gone through the submissions made by both sides. The first issue to be decided is whether the appellant are required to pay 6%/8% of the value of exempted services under Rule 6(3)(i) or they may be allowed to make the payment under Rule 6(3)(ii). Revenue's contention is that payment under Rule 6(3)(ii) can be allowed only when the procedure under Rule 6(3A) is followed. This procedure requires various conditions to be followed as mentioned below :—

"(a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely :—