2023 (9) TMI 715 - AT - Central Excise

Reversal of CENVAT Credit - liability to pay 5% / 10% / 6 % of value of the exempted final products cleared for the disputed period 01.02,2008 to 30.11.2012 in terms of Rule 6 (3) (i) of CCR 2004 as proposed in the SCN - extended period of limitation - HELD THAT - The facts bring out that the appellant has reversed the proportionate credit to the tune of Rs.10,91,346/- along with interest on 05.01.2013. In spite of this, the show cause notice has been issued on 05.03.2013 alleging that the appellant has to pay an amount equivalent to 5% / 10% / 6% of value of exempted final goods for the reason that the appellant has not filed declaration giving the option to the department that they intend to reverse the proportionate credit of the inputs used in the manufacture of exempted products. The issue stands covered by decision in the case of M/S TIARA ADVERTISING VERSUS UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE 2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT . The Hon ble High court held the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. Similar view was decided by the Tribunal in the case of M/S NAVA BHARAT VENTURES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE CUSTOMS SERVICE TAX, HYDERABAD (VICE-VERSA) 2021 (11) TMI 426 - CESTAT HYDERABAD where it was held that The obligations under Rule 6 are in the form of various alternatives and the assessee is free to choose any option. There is no mechanism either in the CCR or in the Act to enforce any of the options or one of the options on the assessee. If the assessee does not choose any of the options and still avails CENVAT credit, such irregularly availed CENVAT credit can, of course, be recovered under Rule 14 of the CCR. Thus, the demand cannot sustain and requires to be set aside. The issue on merits is decided in favour of the appellant. In the present case the appellant has reversed the proportionate credit before the SCN. There is no evidence put forward by the department to establish that there was suppression of facts with intent to evade payment of duty. For this reason, the appellant succeeds on the ground of limitation also. The impugned order is set aside. The appeal is allowed.

Summary

Issues Involved:
1. Liability to pay 5% / 10% / 6% of the value of exempted final products under Rule 6 (3) (i) of Cenvat Credit Rules, 2004.
2. Whether the show cause notice is barred by limitation.

Summary:

Issue 1: Liability to pay 5% / 10% / 6% of the value of exempted final products under Rule 6 (3) (i) of Cenvat Credit Rules, 2004.

The appellants are engaged in the manufacture of Tapioca Starch and were found to be using common inputs for both dutiable and exempted products without maintaining separate accounts. The department issued a show cause notice demanding payment equivalent to 5% / 10% / 6% of the value of exempted goods under Rule 6 (3) (i) of CCR 2004. The appellant argued that they had reversed the proportionate credit as required under Rule 6 (3) (ii) before the issuance of the SCN. The Tribunal referred to the decision in Tiara Advertising Vs Union of India, which held that Rule 6 (3) merely offers options to an output service provider and does not allow the authorities to choose an option on behalf of the service provider. Similar views were upheld in cases like M/s. Nava Bharat Ventures Ltd. and Linkwell Telesystems Pvt Ltd. The Tribunal concluded that the demand under Rule 6 (3) (i) cannot be sustained as the appellant had already reversed the proportionate credit, satisfying the requirements under Rule 6 (1) and 6 (2).

Issue 2: Whether the show cause notice is barred by limitation.

The appellant argued that the figures were available in the accounts and verified by the Range Officer, showing no suppression of facts. The credit availed on common inputs was only Rs.1,25,000/-, and the appellant had reversed Rs.10,91,346/- along with interest. The Tribunal found no evidence of suppression of facts with intent to evade duty and held that the show cause notice invoking the extended period was not sustainable.

Conclusion:

The Tribunal set aside the impugned order, deciding both issues in favor of the appellant. The demand under Rule 6 (3) (i) was not sustained, and the show cause notice was deemed barred by limitation. The appeal was allowed with consequential relief.