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2015 (9) TMI 776 - ALLAHABAD HIGH COURT

2015 (9) TMI 776 - ALLAHABAD HIGH COURT - 2015 (330) E.L.T. 872 (All.) - Reversal of cenvat credit - at proportionate rate or at 10%/5% as per Rule 6(3) - Non maintenance of separate inventory - Contravention the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004 - Held that:- Neither there is any allegation in the memorandum of appeal nor it has been argued on behalf of the appellant that the findings of fact recorded by the Tribunal, are perverse. The Tribunal being the last fact finding .....

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fic directions, was accepted by the appellant/ Central Excise Department and thus became final. Therefore, it was not open for the Commissioner of Central Excise, Kanpur to pass the order ignoring the remand direction and confirming the demand on the same grounds as taken in the first order in original which was set aside by the Tribunal.

The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding .....

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operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. - No merit in this appeal. No substantial question of law arises - Decided against Revenue. - Central Excise Appeal No. - 202 of 2015 - Dated:- 31-8-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. For the Appellant : Ashok Singh, Sr. S. C. For the Respondent : Shashank Shekher Mishra .....

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of Cenvat Credit Rules, 2004 can be extended for the period beyond 01.04.2008 under Notification No.10/2008-CE(NT) dated 01.03.2008 under the facts and circumstances of the case. (ii) Whether the benefit of Rule 6(3)(ii) & (iii) of the Cenvat Credit Rules, 2004 be extended to the party when option to avail a particular provision as required under Rule 6(3)(A)(a) of Cenvat Credit Rules, 2004 has not been exercised by the party. 3. Learned counsel for the appellant submits that the Tribunal h .....

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perused the record. 6. Briefly stated, the facts of the present case are that a show cause notice dated 19th March, 2010 was issued by the appellant to the respondent-assessee demanding Central Excise Duty of ₹ 2,08,96,245/- on the ground that the assessee had not maintained separate inventory/ accounts of raw material and input services used in the manufacture of dutiable/ exempted glass and glassware and thus, contravened the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004 (here .....

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Excise Duty of ₹ 15,92,240/-. 7. The aforesaid two show cause notices were adjudicated by the Commissioner of Central Excise, Kanpur and an order in Original No.09, dated 27.05.2011 was passed confirming a demand of duty of ₹ 95,51,744/- for the period from 01.04.2008 to 31.03.2010 and allowed application of the assessee under Section 73 of the Finance Act, 2010 extending the benefit of ₹ 1,29,36,741/- for the period from 01.04.2005 to 31.03.2008. While passing the Order in Ori .....

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ed goods and also paid ₹ 7,78,472/- vide TR-6, Challan No.00415 dated 03.11.2010 as interest @ 24% per annum, which was found verifiable. 8. The aforesaid application under Section 73 was allowed for the period from 01.04.2005 to 31.03.2008, but the benefit was declined for the period from 01.04.2008 to 31.03.2010 observing that although the assessee had included this period in its application under Section 73(2) of the Finance Act, 2010 and was maintaining separate accounts of one input u .....

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Appeal No.2257 of 2011 before the Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi, which was allowed by Final Order No.A/346/2012-EX(BR) dated 27.02.2012 observing/ directing as under: "10. As per the provisions of Section 73(3) of Finance Act, 2010, if the Commissioner finds that the credit reversed by the assessee is not correctly reversed, the only option available to the Commissioner is to calculate it correctly and then ask them to reverse the correct am .....

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5% of the value of the exempted product. Prima facie, we are convinced that the assessee has complied with the provisions of the amended Rule 6 of Cenvat Credit Rules, 2004. Therefore, we find it proper to grant waiver from pre-deposit of dues arising from the impugned order for admission of the appeal. After granting such waiver, we take up the appeal itself for disposal. 11. Since we are of the view that the Commissioner has not given proper reasons why benefit under Section 73 of Finance Act .....

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ecide the quantum of input credit to be reversed by the appellants as per provisions of Rule 6 of Cenvat Credit Rules. Thus the stay petition and appeal are disposed of." 10. Since there were certain mistakes in the said order of the Tribunal, the assessee moved a rectification of mistake application, which was disposed of by Misc. order No.719/2012-EX(BR) dated 19.06.2012 as under: "4. The last paragraph of the order shall be numbered as '11' instead of '10'. 5. After .....

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inal No.09, dated 27.05.2011 and thus again confirmed the demand of ₹ 95,51,744/-. He observed in paragraphs 6 and 15.1 that the aforementioned Final Order and the Misc. order of Hon'ble CESTAT had been accepted by the Committee of Commissioners as has been informed by the Superintendent (Review), vide letter C.No.IV-131/R/C/2012/5219 dated 20.4.2012 and 1935 dated 24.12.12 and the matter is being taken up for fresh discussions and recording the findings. 12. In his aforesaid order dat .....

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t for receipt, consumption, inventory of duty paid inputs meant for use in manufacture of dutiable final products and the quantity of inputs meant for use for manufacture of exempted goods. (iv) They had been taking CENVAT credit of that part of input or input service, which had been used for manufacture of dutiable final products only. No CENVAT credit has been taken on the input/ input services, which were used in manufacture of exempted goods. (v) During the period from April, 2008 to Septemb .....

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vices against which the credit had not been taken. (xiii) In view of the aforesaid section 73(1) of Finance Act, 2010 read with Rule 6(3)(ii) of CENVAT Credit Rules, 2004 (as applicable w.e.f. 01-04-2008), they submitted an application dt. 04-11-2010 and reversed/ paid the amount of ₹ 8,68,167/- for the period from 01-04-2005 to 31-08-2009 along with interest of ₹ 7,78,472/-. During the period from 01-04-2005 to 31-08-2009, they had not taken credit of ₹ 1,57,73,152/- and submi .....

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.A/50281/2015-EX(DB), dated 09.02.2015 observing as under: "11. The appellant by using common cenvat credit availed inputs and input services manufactured dutiable final products and exempted final product. The present dispute is only for the period from April, 2008 to March, 2010. During the period prior to 2008, as per the provisions of Rule 6 (2) of the Cenvat Credit Rules, 2004, when a manufacturer by using common cenvat credit availed inputs or input services manufactured dutiable and .....

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In terms of Rule 6(3)(b) the manufacturer was required to pay an amount equal to 5%/10% of the value of the exempted goods cleared by him. However, w.e.f. 1.4.2008, such a manufacturer was given an additional option, which was to pay an amount equal to cenvat credit involved on the inputs/or input services used in or in relation to the manufacture of exempted final products and this amount was to be determined subject to the conditions and the procedure prescribed in sub-rule ( 3A ) of Rule 6. B .....

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ufacture of dutiable and exempted final products and on this basis, demand of ₹ 95,51,744 /- has been confirmed on the basis of 5%/10% of the value of the exempted final products cleared during the period 1.4.2008 to March, 2010. However, the Tribunal vide Final Order dated 27.02.2012 read with misc. order dated 11.06.2012 in respect of ROM application, has held that the appellant even for the period from April, 2008 to March, 2010, would be eligible for the benefit of Section 73 of Financ .....

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it Rules, 2004 is not called for and had set aside the penalty. We notice that in the de novo order, the directions of the Tribunal in the remand order mentioned above have been duly noted in para - 4,5 & 6 of the Commissioner's order, wherein it is also mentioned that the final order as well as misc. order have been accepted by the Committee of Commissioners. However, what we find is that the Commissioner disregarding the appellant's plea that during the period from April, 2008 to M .....

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but has also decided to impose penalty of equal amount on the appellant. We are of the view that this order of the Commissioner is not only without application of mind whatsoever but is also in contumacious disregard of the decision of the Tribunal. When the Tribunal has given a clear finding in the remand order that for the period from April, 2008 to March, 2010, the appellant would be required to pay an amount equal to the cenvat credit involved in respect of the input/input services used in .....

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nd on the basis of Rule 6(3)( i ) i.e. on the basis of 5%/10% of the sale value of the exempted final products is that- (a) retrospective amendment by Section 73 of the Finance Act, 2010 is not applicable for period beyond 31.03.2008; and (b) the benefit of amendment to Rule 6(3) by notification no. 10 /08-CE(NT) dated 1.3.2008 is not applicable for availing the option as per clause (ii) of Rule 6(3) of reversing the cenvat credit attributable to input/input services used in or in relation to ma .....

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consumption of the inputs & input services meant for the manufacture of exempted final products and they had not taken cenvat credit in respect of inputs/input services used in the manufacture of exempted goods. This plea of the Appellant stands confirmed by the verification report dated 6.8.2013 of the Range Superintendent to Superintendent (Tech.), Central Excise Division, Agra and the report sent by AC, Agra to AC (Adjudication), Headquarters office, Kanpur, according to which during 200 .....

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8.2013 has been totally ignored by the Commissioner in her order dated 12.12.2013. Even if no option has been given for reversal of cenvat credit in terms of Rule 6(3)(ii), merely on this ground the provisions of Rule 6(3)( i ) can not be forced upon the assessee when the assesse claim has been that during 2008-09 and 2009-10 period, they had not taken cenvat credit in proportion to the use of inputs/input services in relation to manufacture of exempted final products. In any case, when this iss .....

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. 13. In view of the above discussion, there is no option but to set aside this order of the Commissioner and remand the matter to the adjudicating authority once again for de novo adjudication in terms of the Tribunal's final order dated 27.02.2012 read with Misc. Order No.719 /2012-EX dated 11.06.2012. To repeat, in the de novo adjudication proceedings, which will be the third round of adjudication by the Commissioner, the Commissioner must requantify the cenvat credit to be reversed on pr .....

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missioner (Adjudication) on this issue. In view of the Tribunal's final order dated 27.12.2012, the Commissioner cannot once again go into the question of applicability of the provisions of Rule 6(3)(ii). Since the Tribunal had set aside the penalty, in de novo proceedings, the Commissioner cannot decide to impose the penalty again. 14. The conduct of the Commissioner in passing the impugned order, which was in course of de-novo proceedings in pursuance of the Tribunal's Final Order date .....

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the Commissioner in para -6 of her order had been accepted by the Committee of Commissioners. The order is in contumacious disregard of the Tribunal's directions, besides having been passed by totalling disregarding the Appellant's plea that during the period of dispute, they had not taken the cenvat credit in proportion to the use of inputs/input services in or in relation to the manufacture of the exempted final products and the report of jurisdictional Superintendent supporting this .....

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, who has to waste his time and money in pursuing the appeals, but also a cost for the Tribunal being run with tax payer's money, which has to waste its time in deciding appeals against orders which should never have been passed. What we find disturbing is that the tendency to pass such irresponsible adjudication orders is increasing and if unchecked, it would result in collapse of the dispute resolution mechanism and no amount of increase in the number of benches can bring down the increasi .....

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d by adjournment. In our view this principle though in the context of frequent requests for adjournment will apply in a case where the commissioner defying the Tribunal's directing and ignoring the provisions of law passes an order which should never have been passed and thereby forcing the assessee to file appeal before the Tribunal. Accordingly, a Cost of ₹ 10,000/- (Rupees ten thousand only) is imposed on the Respondent Commissioner which is to be paid by the Commissioner who has ad .....

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015 has grossly erred in holding that the benefit of Section 73 of the Finance Act, 2010 shall also be available for the period from April, 2008 to March, 2010 irrespective of the fact that- (A) The amendments were effective only for the period from 10.09.2004 to 31.03.2008 (both days inclusive), and (B) Only to those cases in respect of which a dispute relating to adjustment of credit on inputs or input services used in or in relation to manufacture of exempted final products relating to afores .....

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onwards. In fact, as desired under Section 73(2) of the Finance Act, 2010, the application dated 04.11.2010 was filed by the party only for the period from 01.04.2008 to 31.08.2009, which was allowed by the then Commissioner only for the period upto 31.03.2008, as was in accordance with the period mentioned in Section 73 of the Finance Act, 2010. 3. That the Hon'ble CESTAT in the Final Order dated 09.02.2015 has grossly erred in allowing the benefit of the provisions of Rule 6(3)(ii) & .....

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party has been recorded in the impugned Order-in-Original in as much as the issue has been discussed in detail in paras 13 and 14. 5. That the Hon'ble CESTAT in the Final Order dated 09.02.2015 has grossly erred in allowing the benefit of Rule 6(3) of the Cenvat Credit Rules, 2004, even when the option has not been exercised on the ground of substantial compliance in as much as substantial compliance for exceeding the benefit of Rule 6(3) of the Cenvat Credit Rules, 2004 is not always suffi .....

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of M/s Hari Chand Shri Gopal and Ors Vs UOI [2010(260)ELT 0003(S.C.)] in which theory of substantial compliance has not been held to be sufficient to grant the benefit of exemption. Further, Hon'ble Apex Court in the case of M/s Indian Aluminium Co. Ltd. Vs Thane Municipal Corporation [119 (55) ELT 454 (SC)] has also held the same. 6. The order passed by the CESTAT in Para 14 of the Final Order dated 09.02.2015, including imposition of costs for ₹ 10,000/- on the adjudicating authority .....

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misc. order dated 11.06.2012 in respect of ROM application, has held that the appellant even for the period from April, 2008 to March, 2010, would be eligible for the benefit of Section 73 of Finance Act, 2010 and accordingly, would be liable to pay only an amount equal to the actual cenvat credit involved in respect of input or input service used in or in relation to the manufacture of exempted final products and the matter had been remanded to the Commissioner only for the quantification of t .....

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it involved in respect of the input/input services used in the manufacture of exempted final products and the Tribunal also decided that in the circumstances of the case, imposition of penalty is not called for and had set aside the penalty, the Commissioner in the de novo proceedings could not have ordered determination of quantum of demand under Rule 6(3)( i ) on the basis of 5%/10% of the sale value of the exempted final products and could not have decided to impose penalty of equal amount. ( .....

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d 6.8.2013 of the Range Superintendent to Superintendent (Tech.), Central Excise Division, Agra and the report sent by AC, Agra to AC (Adjudication), Headquarters office, Kanpur, according to which during 2008-2009 and 2009-2010, the credit not taken in respect of inputs/input services used in or in relation to manufacture of exempted final products was more than the credit required to be reversed in terms of the formula of sub-rule ( 3A ) of Rule 6. If this is correct, there was absolutely no n .....

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has been that during 2008-09 and 2009-10 period, they had not taken cenvat credit in proportion to the use of inputs/input services in relation to manufacture of exempted final products. (vii) In any case, when this issue had been decided by the Tribunal in the remand order and Tribunal had directed for determination of the amount payable under Rule 6(3) in proportion to the use of inputs/input services in or in relation to manufacture of exempted final products, the Commissioner in de novo proc .....

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gs of fact cannot be interfered unless it is alleged and established that the findings are perverse. Thus, no substantial questions of law as framed by the appellant arise for consideration. 17. So far as the findings of the Tribunal with regard to "judicial discipline" is concerned, we find that it is undisputed that the earlier Final Order No.A/346/2012/EX (BR) dated 27.02.2012 as corrected by order dated 19.06.2012, whereby the Tribunal remanded the matter to the present appellant w .....

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In the case of State of West Bengal & Ors vs. Shivananda Pathak & Ors, (1998) 5 SCC 513 (para-28), Hon'ble Supreme Court held that if a judgment is over-ruled by the higher court, the judicial discipline requires that the Judge whose judgment is over-ruled must submit to that judgment. He cannot, in the same proceedings or in collateral proceedings between the same parties, re-write the over-ruled judgment. 19. In the case of Bihar State Government Secondary School Teachers Associat .....

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ipline and propriety are the two significant facets of administration of justice. Every court is obliged to adhere to these principles to ensure hierarchical discipline on the one hand and proper dispensation of justice on the other. 21. In the case of RBF RIG Corporation, Mumbai Vs. Commissioner of Customs (Imports), Mumbai, (2011) 3 SCC 573 (para-25), Hon'ble Supreme Court laid down the law that if for any reason, the subordinate authority is of the view that the directions issued by the C .....

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, (2007) 2 SCC 503 (para-9), Hon'ble Supreme Court held it was obligatory on the part of the authorities concerned to comply with the order passed by the Collector (Appeals). The authorities were bound to do so in view of the doctrine of judicial discipline. 23. In the case of Union of India and others Vs. Kamlakshi Finance Corporation Ltd., 1992 Supp (1) SCC 443 (para-6), Hon'ble Supreme Court held the High Court has rightly criticised the conduct of the Assistant Collectors and the har .....

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thorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. 24. In .....

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