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M/s Kirti Industries (I) Ltd. Versus Commissioner of Central Excise Indore

2016 (7) TMI 1203 - CESTAT NEW DELHI

Determination of price for the purpose of reversal of Cenvat Credit - whether price is inclusive of 10% amount or not - demand of 10% of the price of exempted final products - Difference of opinion - Held that:- Whether the amount of 10% required to be reversed in terms of provisions of Rule 6(3)(b) is to be considered as "other tax" so as to deduct the same from the assessable value and the appeal has to be allowed by following the earlier order of the Tribunal in the same assesse's case as hel .....

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Ashutosh Upadhyay, Advocate for the Appellants Shri RK Mishra, DR for the Respondent ORDER Per B Ravichandran : The appeal is against order dated 27.6.07 of Commissioner (Appeals I) Indore. The appellants are engaged in the manufacture of plastic pipes, accessories etc and sprinkles systems liable to Central Excise duty. They were also availing Cenvat Credit of duty paid on inputs in terms of Cenvat Credit Rules, 2004. Some of their final products are exempted from payment of duty. In terms of s .....

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om the price and calculated the amount payable on such cum-duty basis. Taking a view that method adopted by the appellant to calculate the 10% amount payable in terms of Rule 6(3) has been wrongly arrived at resulting in short payment, proceedings were initiated against the appellant which resulted in order in original confirming the demand of ₹ 44,94,723/- and imposing penalty of ₹ 11,25,000/- 2. On appeal, the Commissioner (Appeals) upheld the demand for the normal period (Nov, 200 .....

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merits of the case, it is seen that appellants eligibility to Cenvat Credit on various inputs is not in dispute. As it is not possible for them to maintain separate accounts for inputs used in the manufactured of exempted final products or dutiable products, they have opted for the provisions of Rule 6(3) (b) which is reproduced as below: (b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten per cent of the total price exclud .....

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by debiting the CENVAT credit or otherwise. Explanation II, - If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT credit wrongly taken. Explanation III. - For the removal of doubts, it is hereby clarified that the credit shall not be allowed on inputs and inputs services used exclusively for the manufacture of exempted goods or exempted services. 5. When they c .....

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ction. The appellant pleaded that 10% payment stipulated by the said rule is a statutory levy which should be treated as "other taxes" and eligible for exclusion from the price. The impugned order rejected this plea on the basis of Tribunal's decision in the case of Mahindra & Mahindra Ltd. vs. CCE Mumbai [2007 (211) ELT481 (Tri-Mum)]. In the said case, the Tribunal held that 10% amount payable under Rule 6(3) is neither in the nature of money raised for Government nor a tax de .....

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ble Supreme Court in the case of CCE vs. Kisan Sahakari Chini Mills Ltd. [2001 (132) ELT 523(SC)]. The Hon'ble Supreme court examined the scope of term "other taxes" for exclusion from the assessable value. It was held that "taxes" as such are not defined in the Central Excise Act. If the expression "taxes" is to be understood in the absence of any definition, it would certainly cover any levy. It was held that any compulsory exaction made under an enactment is .....

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ve of reason behind the provision of Rule 6(3)(b), payment of 10% is relatable to the price of exempted goods. In other words, the exempted goods are in a way subjected to such payment before clearance. The payment in the present case is either by way of reversal of credit or even by cash. It is apparent that the exemption available and claimed on the goods is linked to payment of 10% of price of such exempted goods in terms of Cenvat Credit Rules. This is a statutory requirement. In case the as .....

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this amount in terms of statutory provisions. Accordingly, it is clear that the said amount of 10% cannot form part of the price to calculate the said amount of 10%. Accordingly, we hold that the impugned order, in so far as it relates to confirmation of demand against the appellant is not sustainable. Accordingly, we set aside the same and allow the appeal. Per Archana Wadhwa : 8. After having gone through the order proposed by my learned brother Shri B. Ravichandaran, Member (Technical), I fi .....

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t after deducting the said amount. 11 . A reading of the entire provisions of Rule 6, shows that an assessee is not entitled to avail Cenvat credit of duty in respect of the inputs which stand used in the manufacture of exempted goods. However, wherever the assessee is manufacturing dutiable as also exempted final product, he is under a legal obligation to maintain separate accounts of the inputs being used in the manufacture of dutiable final products as also the exempted final product. It is o .....

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tax" as appearing in the said Rule and whether while paying an amount equal to the specified amount, in terms of the said Rules, the same has to be considered as tax so as to deduct the same from the price of exempted final product. 12. I find that a complete reading of the said Rule leads us to conclude that the said provisions of law is a beneficial and facilitating piece of legislation. The law, first of all requires an assessee not to avail the credit of duty paid on the inputs used in .....

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vail cenvat credit in respect of inputs to be used in the manufacture of exempted final product and in a given case, it may not be always be possible to quantify cenvat credit availed in respect of such inputs used in the manufacture of exempted final product, the legislation, in its wisdom, has specified a particular amount in terms of the provisions of Rule 6(3)(b), which such an assessee would be required to reverse. Such reversal is mainly and primarily to neutralize the effect of cenvat cre .....

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ating an assessee to maintain common inputs credit amount and to reverse a particular amount so as to neutralize the credit which was inadmissible to him ab initio. I also take note of explanation I which is to be effect that the amount required to be paid in terms of said provisions of law would by debiting the cenvat credit amount. The fact that such payment is required to be made by debiting the cenvat credit is another factor which leads one to conclude that said reversal is primarily and ba .....

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the said payment is compulsory exaction made in an enactment and as such, held to be as a duty or impost which is in the nature of 'tax'. For holding so, the Bench has followed the Hon'ble Supreme Court decision in the case of CCE vs. Kisan Sahakari Chini Mills Ltd. [2001 (132) ELT 523(SC)] as also the Supreme Court decision in the case of Chhata Sugar Co. Ltd. [2004 (3) SCC 466] . 14. I have examined the said decisions of the Hon'ble Supreme Court. In the case of CCE vs. Kisan S .....

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e Central Excise Act relates to the valuation of excisable goods for the purpose of charging duty of excise, and requires all the taxes paid by an assessee to be deducted from the total value charged by him so as to arrive at the assessable value. Such assessable value is required to be adopted for the purpose of payment of duty of excise. The Hon'ble Supreme Court in the said decision observed that inasmuch as the administrative charges required to be paid by the assessee was a compulsory e .....

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ed by the assessee is not a compulsory levy rather it is not a levy at all. Section 3 of the Central Excise Act 1944 refers to the duty to be paid by an assessee and provides that the same shall be levied and collected in such a manner as may be prescribed. The reversal of 10% of the value of goods can not be called as levy inasmuch as it is not a tax imposed by the legislation and the said 10% reversal has arisen on account of assessee exercising the option for common maintenance of inputs. Suc .....

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l Excise Act. It stand observed in the said decision that the administrative charges is in addition to the price at which goods are sold in the ordinary course of business by the sugar factory. The pre-dominant object of the U P Act is to maximise the revenue by way of tax while regulating the storage and supply of molasses. The beneficiary under the said Act is the distillery and it is the distillery which provides important source of revenue to the State. It was in these circumstances, the Hon .....

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s of Rule 6(3)(b) cannot be considered to be a 'tax' so as to claim its deduction. The tax is always imposed with the exercise of legislative competency conferred upon the said legislature and it has to be born in mind that the assessee is absolutely and legally bound to pay the tax, so levied whereas the reversal in terms of rule 6(3)(b) of Cenvat Credit Rules is not compulsory and comes into play only in a given situation where the assessee maintains, common cenvatable input account. T .....

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rwise inadmissible and allowed as facilitation. It is neither in nature of money raised for Government nor a tax deduction whereof could be claimed under section 4 of the Central Excise Act, 1944. 17. To the similar effect is the decision of Tribunal in the case of Hwashin Automotive India Pvt Ltd. vs. CCE Chennai IV [2007 (218) ELT 703 (Tri-Chennai)] wherein it was observed that payment of 8 / 10% under Rule 6 of Cenvat Credit Rules cannot be considered to be duty, and the procedure under secti .....

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