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2015 (8) TMI 1236 - CESTAT MUMBAI

2015 (8) TMI 1236 - CESTAT MUMBAI - 2015 (324) E.L.T. 189 (Tri. - 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 avail .....

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ase, the appellant has not reversed the credit on inputs on proportional basis 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 .....

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of duty and also availing cenvat credit for the inputs used in the manufacture 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) .....

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he shall pay an amount equal to 8% of the total price, excluding sales tax and 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 whic .....

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31.8.2004 informed that w.e.f. 1.9.2004 they will not be availing cenvat credit 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 hydraul .....

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98 crores) by partly paying from the credit available and partly paying by cash. 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 Rul .....

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the demand of an amount of ₹ 7,05,16,944/- under Rule 14 of the Cenvat 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 b .....

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.e.f. 1.9.2004, they have not availed the credit on inputs used in the exempted 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 .....

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rther submitted that the appellant on their own paid cenvat credit of ₹ 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 b .....

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at they have reversed the credit in 2004 itself, they have satisfied the condition 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 r .....

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Supreme Court in the case of Sonalac Paints and Coatings Ltd. vs. CCE, Chandigarh 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 .....

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ts Ltd. reported in 2010 (260) ELT 54 (Guj.); (iv) Murli Industries Ltd. reported 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 vali .....

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utilized during the period when final product dutiable credit not to be reversed 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 w .....

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pt from payment of duty. He further submitted that the Hon ble High Court of 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 b .....

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mitted that the Hon ble Supreme Court in the case of Amrit Paper vs. CCE, Ludhiana 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 .....

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ufacture of exempted goods, except in the circumstances in sub rule (2). (2) 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 man .....

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he generation of electricity; iii. Naphtha (RN) falling within Chapter 27 of 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 defe .....

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product charged by the manufacturer for the sale of such goods at the time of 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 t .....

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er working out the details, they put a system in place and w.e.f. 1.9.2004 they 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 Rul .....

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stem if used in exempt tractors. Even in respect of the inputs on which they 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 judgmen .....

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on 3.10.2000 and in these circumstances the Hon ble Supreme Court has upheld 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 .....

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