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2015 (12) TMI 1391 - CESTAT NEW DELHI

2015 (12) TMI 1391 - CESTAT NEW DELHI - TMI - Reversal of CENVAT Credit - Duty demand u/r Rule 6 (3) - Department has alleged that common Cenvat credit availed input services have been used in or in relation to manufacture of dutiable final product (Carbon Black) and exempted final product (steam and electricity) and therefore in respect of sale of steam and electricity an amount equal to 5%/10% of the sale value would be recoverable under Rule 6 (3) of the Cenvat Credit Rules. The appellant's c .....

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d High Court, which is the Jurisdictional High Court, in the case of Hello Minerals Water Pvt. Ltd. vs. Union of India [ALLAHABAD HIGH COURT] has held that if the Cenvat credit initially taken is reversed subsequently it would amount to not taking Cenvat credit and same view has been taken by the Tribunal in the case of JCT Ltd. vs. CCE, Jallandhar [2015 (2) TMI 600 - CESTAT NEW DELHI]. Therefore if the appellant have fully reversed the credit in respect of common services or in other words not .....

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services are of three types as described above. In respect of the services which are exclusively used for manufacture of Carbon Black and the services covered by Rule 6 (5) in respect of which Cenvat credit has been taken upto 31/3/11 the provisions of Rule 6 (2) readwith Rule 6 (3) would not apply. If in respect of the common input services of third category, the appellant have fully reversed the Cenvat credit, the provisions of Rule 6 (2) readwith Rule 6 (3) would not apply and the demand conf .....

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wer plant in the factory compound. The principal raw material for Carbon Black is Carbon Black Field Stock (CBFS) which is subjected to Thermal Cracking in a Reactor. In course of Thermal Cracking of CBFS for manufacture of Carbon Black, "Off Gases" emerge as an unavoidable and inevitable by-product. One of the main components of the off gases is carbon monoxide which is of hazardous nature and for this reason it cannot be released into the atmosphere, as such. Prior to 22/08/08, the o .....

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fication No. 4/06-CE (Sl. No. 31) as falling under Chapter 28 of the Tariff and is fully exempt from duty. Sub-heading 27100000 of the Central Excise Tariff covers "electrical energy" but no rate of duty is specified under this heading. Department was of the view that both electricity and steam which are being sold out by the appellant are "exempted goods" within the meaning of this term as defined Rule 2 (d) of the Cenvat Credit Rules, 2004 and since common Cenvat credit ava .....

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dit Rules, 2004 alongwith interest on it under Section 11AB and imposition of penalty on the appellant under Rule 15 (2) of Cenvat Credit Rules, 2004 readwith Section 11AC of the Central Excise Act. This show cause notice was issued by invoking extended limitation period under proviso to Section 11A (1). Subsequently two more show cause notices dated 27/4/02 and 26/4/13 were issued for the period from April 2011 to March 2013 for demand of total amount of ₹ 2,00,31,455/- from the appellant .....

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rmed the demands under Rufe 6 (3) of the Cenvat Credit Rules alongwith interest and imposed penalties of equal amount. Against these orders of the Commissioner, these appeals have been filed. 1.3 Miscellaneous application No. E/Misc/56316/2014 in appeal No. E/58111/2013 has been filed for extension of stay. Since the matter itself has been heard for final disposal, the miscellaneous application is dismissed as infructuous. 2. Heard both the sides. 3. Shri Amit Jain, Advocate, the learned Counsel .....

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cond category of services are those which are covered by Rule 6 (5) of the Cenvat Credit Rules, 2004 and in respect of these services, the credit has been taken only upto 31/3/11 and w.e.f. 01/4/11, Cenvat credit in respect of Rule 6 (5) services has not been taken, that third category of services are those services like Telecom Services, IT Services, Audit, Courier Service, Manpower Supply Services, repair and maintenance services etc., that the Revenue has not given any break up for these thre .....

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est was rejected by the Commissioner on the ground that subsequent reversal of the Cenvat credit would not exempt them from the provisions of Rule 6 (3), that this view of the Commissioner is incorrect as w.e.f. 01/3/08 the provisions of Rule 6 (3) have been amended with retrospective effect giving a manufacturer an additional option to reverse the proportionate Cenvat credit in respect of inputs or input services used in or in relation to manufacture of exempted final products which is to be de .....

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ng common Cenvat credit availed inputs/input services, that "exempted goods" as per the definition of this term given in Rule 2 (d) of the Cenvat Credit Rules are the 'excisable goods' fully exempt from duty or having nil rate of duty, and the goods which are not excisable would not be covered by the definition of'exempted goods', that in the present case, neither electricity nor steam is excisable, that though electricity is covered by heading 27160000 there is no rate .....

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otification which exempts steam falling under Chapter 28 from whole of duty, the steam is nowhere specified under any subheading of Chapter 28 and steam has to be treated as non-excisable, that since both the alleged exempted products -electricity and steam are non-excisable, provision of Rule 6 (3) readwith Rule 6 (2) would not be applicable, that the Department in earlier show cause notice dated 27/3/06 had treated steam as non-excisable, that in any case in the circumstances of the case, long .....

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,79,59,088/-, that this shows that the orders have been issued without any application of amount and in view of the above, the impugned orders are not correct. 4. Shri R.K. Gupta, the learned DR, defended both the orders by reiterating the findings of the Commissioner. Shri Gupta cited the judgment of Hon'ble Bombay High Court in the case ofCommissioner vs. Nicholas Piramal (India) Ltd. reported in 2009 (244) E.L.T. 321 (Bom.) and pleaded that since the appellant have used common Cenvat cred .....

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the main raw material for which is CBFS. Beside this, they have also have a power plant in the factory. The power generated by this power plant is mainly used for the manufacture of Carbon Black and the remaining power is sold outside. The period of dispute in this case is from June 2006 to March 2013. The appellant beside CBFS also purchase furnace oil to be used in the boiler of the power plant for generating steam apart of which is sold out and the remaining quantity is used for generation o .....

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o the atmosphere as such. During the period prior to 22/08/08, the off gases were being flared. However, w.e.f. 22/8/08 when the appellant expanded the capacity of their power generation plant, they started using off gases in the boiler alongwith furnace oil for generation of steam. Part of the steam is used for generation of power and the remaining steam is sold out. A part of the power generated in the power plant is used in the factory for manufacture of Carbon Black and the remaining power i .....

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m and electricity) and therefore in respect of sale of steam and electricity an amount equal to 5%/10% of the sale value would be recoverable under Rule 6 (3) of the Cenvat Credit Rules. The appellant's contention, however, is that the services being used are three type. The first type of services are those which are directly used in or in relation to manufacture of Carbon Black and in respect of such services the provisions of Rule 6 (2) readwith Rule 6 (3) would not apply. We agree with th .....

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third category of services are Telecom, IT Service, Audit, Courier, Manpower Supply etc. which can be said to have been used for the whole plant. However, the grievance of the appellant is that the Department has not distinguished between the three type of services. On going through the impugned order, we find that this is so, as the Commissioner had not made any distinction between the services which according to the appellant had been used exclusively for manufacture of Carbon Black, services .....

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e furnished evidence in this regard in form of Chartered Accountant's certificate. W.e.f. 01/3/08, the provisions of Rule 6 (3) had been amended to give an additional option to a manufacturer manufacturing dutiable final product and exempted final product by using common Cenvat credit availed input/input services and this additional option was to pay the proportionate credit in respect of input/input services used in or in relation to manufacture of and exempted final product or provision of .....

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