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Mahindra & Mahindra Ltd. Versus Commissioner of Central Excise, Nagpur

2015 (8) TMI 1236 - CESTAT MUMBAI

Denial of CENVAT Credit - agricultural tractors - switching over from Rule 6(3)(b) to Rule 6(2) of the Cenvat Credit Rules - delay in reversal of the cenvat credit. - Exemption under Notification No.23/2004-CE dated 9.7.2004 - Held that:- There is nothing in Cenvat Credit Rules or any other provision in the law that before switching over to Rule 6(2) above, a manufacturer is required to reverse the credit of inputs available in its stores, work in progress and in the finished goods on that date .....

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is as envisaged in the amended Rule 6(3) and in our view, the discussion on the said Rule is irrelevant in the facts of the present case. In the present case, the appellant has switched over to Rule 6(2) w.e.f. 1.9.2004 and reversed actual credit on its stores, work in progress and finished products as on 31.8.2004 and thus submissions by both sides are irrelevant to the facts of the present case. - Decided in favour of assessee. - APPEAL No. E/87792/14-Mum - Final Order No. A/2213/2015-WZB/EB - .....

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re of such goods. Vide Notification No.23/2004-CE dated 9.7.2004, tractors falling under Chapter Heading 8701 became exempt from payment of central excise duty. Thus from 9.7.2004 onwards they were not required to pay central excise duty on the agricultural tractors so cleared. In terms of Rule 6(1) cenvat credit is not allowed on inputs which are used in the manufacture of exempted goods. Further, in terms of Rule 6(2) if a manufacturer is manufacturing dutiable as well as exempted goods, he is .....

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nd other taxes if any paid on such exempted goods. 2. The appellant was not in a position to immediately segregate the records of inputs which go into the production of exempted goods and which go into the dutiable goods. They therefore vide their letter dated 14.7.2004 informed the Revenue that they are not in a position to immediately segregate the inputs which will go into the production of the exempted goods and which will go into the production of dutiable goods and therefore they will be p .....

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dit on any input which is used in the manufacture of exempted tractors. Further, hydraulics which is an integral part of tractor and is otherwise chargeable to duty, they will be availing the credit of inputs used in the manufacture of hydraulic unit. Further in respect of such hydraulic unit which will be used in the exempted tractors, they will reverse the credit of duty on inputs used in such hydraulics. Other hydraulics would be cleared on payment of duty. They also informed vide the said le .....

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ash. 3. Revenue issued a show cause notice dated 6.10.2005 demanding an amount equal to 8/10% of the total price, (excluding sales tax and other taxes) of the exempted final product charged by the manufacturer for sale of such goods at the time of their clearance from their factory under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The amount was proposed to be recovered under Rule 12 of the erstwhile Cenvat Credit Rules, 2002 read with Section 38A of the Central Excise Act, 1944 and under Rul .....

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t Credit Rules, 2004, Rule 12 of erstwhile Cenvat Credit Rules, 2002 read with Section 11A of the Central Excise Act, 1944. Interest under Section 11AB was also confirmed. A penalty equal to the amount confirmed was also imposed under Rule 13 of the Cenvat Crediit Rules, 2002 read with Section 38A of the Central Excise Act, 1944 and Rule 15 of the Cenvat Credit Rules, 2004. Aggrieved by the said order, the appellant is before us. 4. Learned counsel for the appellant submitted that the department .....

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ted final product. They also started maintaining separate accounts for inputs used in exempted and dutiable goods as per Rule 6(2). Hence there is no contravention of Rule 6 of the Cenvat Credit Rules. 4.1 The next submission of the learned counsel was that the provisions of Rule 9 of the Cenvat Credit Rules, 2002 and Rule 11 of the Cenvat Credit Rules, 2004 are not applicable before 1.3.2007. It was only w.e.f. 1.3.2007 that Rule 11 of Cenvat Credit Rules, 2004 was amended to insert sub-section .....

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; 4,98,83,659/- on 24.9.2004. Under the circumstances, the appellant is squarely covered by Rule 6(2) of the Cenvat Credit rules. It was submitted that the demand is to be restricted on the stock of inputs as on 31.8.2004 in any case and cannot be on the final products cleared between 1.9.2004 to 24.9.2004. It was further submitted that Section 72 of the Finance Act, 2010 amended Rule 6 of the Cenvat Credit Rules, 2002 by inserting sub-rule (b) of Rule 6 permitting manufacturer to reverse the pr .....

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dition of the said Rules and therefore no further demand is sustainable. It was also submitted that the Commissioner has confirmed the demand of ₹ 7,05,16,944/- without deducting the amount of ₹ 4,98,83,659/- paid by them. It was also submitted that the tractors became chargeable to nil duty w.e.f. 9.7.2004 and in view of various decisions of various courts, the credit of inputs taken before 9.7.2004 is not required to be reversed. In support of his contention, the learned counsel su .....

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igarh reported in 2015-TIOL-77-SC-CX, wherein a similar situation had occurred in case of a unit availing SSI exemption. The unit was required to reverse the credit of inputs available with them, work in progress or contained in the final product as on 31.3.2000, they reversed the said amount only on 3.10.2000 i.e. on a later date and the Hon ble Supreme Court found the action in order. The learned counsel also submitted the following case laws in support of his contention that once proportional .....

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orted in 2010-TIOL-1586-CESTAT; (v) Ahlocon Parenterals reported in 2011 (265) ELT 72 (T), (vi) Dabur Pharma Ltd. reported in 2010 (262) ELT 275 (T). The learned counsel also submitted the following case laws in support of his contention that the provisions of Rule 11(3) of the Cenvat Credit Rules, 2004 (inserted by Notification No. 10/07-CE(NT) dated 1.3.2007) would apply prospectively and would not apply to credit validly earned/taken prior to 1.3.2007:- (i) CCE vs. Gokaldas Intimate Wear repo .....

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ersed when subsequently final product exempted from duty. 5. The learned Commissioner (AR) reiterated the points mentioned in the impugned order. He submitted that the appellant has not reversed the cenvat credit till 24.9.2004 and therefore it cannot be said that they have opted for maintaining separate records. He further emphasized that a perusal of the impugned order indicate that even after 1.9.2004, the appellant was taking the credit of inputs relating to hydraulic system. After assemblin .....

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Bombay in the case of CCE, Thane-I vs. Nicholas Piramal (India) Ltd. reported in 2009 (244) ELT 321 (Bom.), has held that once the credit on inputs is taken, then the appellants are required to pay 8 or 10% amount. He further submitted various paragraphs of the said judgment. 5.1 The learned AR further submitted that the benefit of the scheme introduced in 2010 cannot be extended to the appellant at this stage as held by this Tribunal in the case of R.R. Paints Pvt. Ltd. vs. CCE, Mumbai reporte .....

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dhiana reported in 2006 (200) ELT 365 (SC), has held that the provisions of Rule 57C of the erstwhile Central Excise Rules, 1944 providing for, in mandatory and categorical terms, non availment of credit if final product exempted, would be rendered nugatory and redundant if exemption granted considering absence of any condition in Notification ibid and primacy not to be given to the Notification over statutory provisions contained in Rule 57C. It was submitted that in the said case, the Hon ble .....

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Where a manufacturer avails of CENVAT credit in respect of any inputs, except inputs Intended to be used as fuel, and manufactures such final products which are chargeable to duty as well as exempted goods, then, the manufacturer shall maintain separate accounts for receipt, consumption and inventory of inputs meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods and take CENVAT credit only on that quantity of i .....

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the said First Schedule used in the manufacture of fertilizer; iv. tyres of a kind used on animal drawn vehicles or handcarts and their tubes, falling within Chapter 40 of the said First Schedule; v. newsprint, in rolls or sheets, falling within heading No.48.01 of the said First Schedule; vi. final products falling within Chapters 50 to 63 of the said First Schedule. vii. goods supplied to defence personnel or for defence projects or to the Ministry of Defence the manufacturer shall pay an amo .....

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f their clearance from the factory. Explanation -1 The amount mentioned in the conditions (a) and (b) shall be paid by the manufacturer by debiting the CENVAT credit or othenvise. Explanation -11 if the manufacturer fails to pay the said amount, it shall be recovered along with interest in the same manner, as prescribed in Rule 12. for recovery of CENVAT credit wrongly taken. A reading of the above Rule would indicate that any manufacturer who is producing dutiable as well as exempted goods has .....

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hey switched over to the scheme as envisaged under Rule 6(2) above. We do not find anything anywhere in the Cenvat Credit Rules or any other provision in the law that before switching over to Rule 6(2) above, a manufacturer is required to reverse the credit of inputs available in its stores, work in progress and in the finished goods on that date and only after reversing the credit the manufacturer can switch over to Rule 6(2). In the absence of any such prohibition, we are unable to appreciate .....

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have taken the credit earlier, the same was reversed if the said input was in stores, work-in-progress or final product available with them. Thus, effectively no credit was taken on the inputs used in the goods cleared from 1.9.2004 without payment of duty. We find the only objection of the Revenue is about delay in reversal of the cenvat credit. We find that the learned counsel for the appellant has submitted a judgment of the Hon ble Supreme Court in the case of Sonalac Paints and Coatings Lt .....

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d the order of the Commissioner, i.e. reversal of credit at a later date will not disentitle the assessee from availing the exemption. 6.1 The learned counsel for the appellant has submitted about the retrospective amendment introduced vide Finance Act, 2010 and the learned Commissioner (AR) has, on the other hand, submitted the judgment of the Hon ble Bombay High Court in the case of RR Paints Pvt. Ltd. (supra). In our view, in the present case, the appellant has not reversed the credit on inpu .....

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