Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (10) TMI 474 - CESTAT CHANDIGARH

2016 (10) TMI 474 - CESTAT CHANDIGARH - TMI - Denial of CENVAT credit - demand of duty along with interest and penalty - production of exemption certificate - clearance of exempted as well as dutiable products as per Rule 6 of the CENVAT Credit Rules, 2004 - Held that: - the Revenue has failed to appreciate the fact that inputs are available for credit at the time of start of manufacture of the goods. There is a great difference between manufacture and their clearance. In this case manufacturing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the value of exempted final product at the time of clearance of final exempted product by utilizing their CENVAT credit account. The Adjudicating Authority has not considered the fact that CENVAT credit to the extent of 6% of the value of exempted final product has already been reversed and the set off the same has granted which reveals that the demand to the extent of reversal 6% of the value of exempted goods twice taxing the appellants which not is permissible in law. - M/s WCL availed .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

garwal, Advocates appellants Shri Atul Honda, Authorized Representative (DR) for the Respondent ORDER The appellants M/s Welspun Corporation Limited (WCL) and M/s Welspun Project Limited (WPL) are in appeal against the impugned order. 2. The brief facts of the case are that both the appellants are manufacturer of various types of pipes and M/s WCL acquired unit in July, 2012 and started manufacturing the pipes. On 05/3/12 WPL received an order for supply of pipes from GMADA. As per the condition .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

der, procured the inputs and availed cenvat credit therein and started manufacturing the pipes. On 20th August 2012, GMADA was able to obtain exemption certificate, in that circumstances, M/s WCL cleared the pipes during the period September 2012 till 04/11/12 without payment of duty as per the exemption certificate on payment of an amount equal to 6% of the value of goods cleared by them. On 05/11/12 M/s WPL further issued a purchase order for supply of pipes on M/s WCL on payment of duty, as n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

premise that M/s WCL is clearing exempted final products, therefore, they are not entitled to avail cenvat credit as per Rule 6 of the Cenvat Credit Rules, 2004. The matter was adjudicated and the cenvat credit was denied consequently the duty was demanded (equivalent to the cenvat credit denied) alongwith interest and penalties on both the appellants were imposed. Aggrieved from the said order, the appellants are before us. 4. Shri Vikram Nankani, Senior Advocate alongwith Shri Vishal Agarwal, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s of the case and as per the said rule, if the appellant is not maintaining separate account of inputs used in manufacturing of dutiable as well as exempted final product, in that case the appellant is required to pay an amount of 6% of the value of exempted final product. It is their contention that they had complied with the provisions of Rule 6 (3) of the Cenvat Credit Rules, 2004, therefore, the proceedings are not to be initiated against the appellants. To support their contentions they rel .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rned AR submits that till 05/11/12 the appellant. M/s WCL was manufacturing only and only exempted final product and the same has been cleared by the appellant. Therefore, till 05/11/12 whatever inputs used in manufacturing of exempted final product are not entitle/ for cenvat credit, therefore, he supported the impugned order. 6. Heard the parties considered the submissions. 7. On careful consideration of the submissions made by both the sides, we find that facts of the case are not in dispute .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ertificate obtained by GMADA in that circumstances M/s WCL is not entitle to take cenvat credit on inputs. We do agree with the contention of the learned AR that if the appellant is manufacturing only and only exempted final product, the appellant is not entitled to avail cenvat credit on inputs but in this case at the time of procurement of order by M/s WCL from M/s WPL on 20th July, 2012, the character of the final goods was not known whether the final goods are exempted or dutiable. It was th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion certificate, the goods were cleared without payment of duty but by reversing 6% of the value of exempted final product is in accordance of law. 8. Admittedly, in this case the appellant has cleared goods on payment of duty and without payment of duty under exemption certificate and appellant is not maintaining separate account of inputs used for manufacturing of dutiable as well as final exempted product in that circumstances provisions of Rule 6 (3) of Cenvat Credit Rules, 2004 are applica .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed on 05/11/12 on payment of duty. Therefore, the Revenue has failed to appreciate the fact that inputs are available for credit at the time of start of manufacture of the goods. There is a great difference between manufacture and their clearance. In this case manufacturing process started much earlier before the date when the exemption certificate was obtained by M/s GMADA. Prior to obtaining the exemption certificate, the character of final manufactured goods was dutiable, in that circumstance .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h has already been reproduced. A manufacturer who avails of Cenvat credit in respect of inputs used in the manufacture of final products which are chargeable to duty as also exempted goods, the manufacturer has to 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 used for the manufacture of exempted goods and takes Cenvat credit only on that quantity of inputs which are used in the ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the inputs are used in the manufacture of both exempted and dutiable goods, in which event if the register as required is maintained the credit can be taken for the quantity of inputs used in the manufacture of dutiable goods. If records are not maintained as required, the duty has to be paid in terms of Rule 6(3). The presumptive tax payable in terms of Rule 6(3) has been recognised and accepted by the Supreme Court in Ballarpur Industries (supra) while construing Rule 57CC. Rule 6(1) does not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

id by a manufacturer who does not maintain accounts. 19. It was submitted on behalf of the assessee that sub-rule (3) of Rule 6, is attracted only when the assessee does not want to comply with sub-rule (1) of Rule 6 by reversing the credit. In other words, it is submitted that it is only when the assessee wants an exemption as also credit that the assessee has to comply with Rule 6(3)(b). In our opinion, such a construction militates against Rule 6(1) and Rule 6(3) (b) as also Rule 6(2). T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ds. Such manufacturer can avail of credit only in terms of Rule 6(3). 20. The option to pay 8% or 10% under sub-rule (3) it is submitted, is not available to goods covered by Rule 3(a). Rule 3 in so far as (a) is concerned in respect of exempted goods set out therein. On failure to maintain accounts the rule imposes on the manufacturer a burden to pay an amount equivalent to the credit attributed to the inputs used in relation to the manufacture of such final products at the time of clearan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tted on behalf of the appellant that exemption contemplated under Rule 2(e) of Cenvat Credit Rules, 2004 is not an absolute and unconditional exemption and Rule 6(1) does not cover exemptions which are subject to condition and tax is recoverable from the supplier or from the receiver if the conditions are not fulfilled. The learned Counsel relied upon the decision of the Tribunal in the case of Bajaj Tempo Ltd. v. C.C.E., Pune [1994 (69) E.L.T. 122 (Tri.-Mumbai)] in which a view was taken that e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is view. The view of the Larger Bench in the case of Sterlite Industries (I) Ltd. (supra) has been upheld by the Hon ble High Court of Bombay as reported in 2009 (244) E.L.T. A89 (Bom.). We have considered the submissions. We find that the decisions of the Tribunal in the case of Bajaj Tempo Ltd. (supra) and Sterlite Industries (I) Ltd. (supra) are squarely applicable to the present case. In this case also, the services are allowed to be provided to SEZ units/developer, subject to conditions whi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed to be fulfilled by the raw material supplier. The relevant paragraphs of both the judgments are reproduced below for better appreciation : Para 7.2 to 7.6 of judgment in Bajaj Tempo Ltd. (supra) - 7.2 Under the Modvat scheme, credit of duty paid on notified inputs is to be given for payment of duty on the notified final products, if such inputs are used in or in relation to the manufacture of final products and such inputs are not hit by explanation to Rule 57A. This same concept is clea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an take Modvat credit on primary inputs used in the manufacture of secondary inputs (M. V. parts, I.C. engines) so long as the final product namely Motor vehicle pays duty. Hence, we are to agree with the ld. counsel Shri Lodha that Notification 217/86 stands on a different footing, when it comes for consideration for purposes of applying Rule 57C. It is not like any other exemption, where intention is to forego the levy on the products cleared from the factory. ................................. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

argument. But we find that in the case of exemption for goods removed to 100% EOU, such products are totally exempted and even the final export products turned out from these items in the 100% EOU are not to suffer any duty. Hence in that case, the Government, as a policy measure for freeing the export products from the burden of any input levy, have to specifically provide for an exception in Rule 57C. But in the case of Notification 217/86, the final products manufactured out of inputs are re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation 217/86 and not to take away the benefit of averting duty payment at each stage in the line of production. Hence, a mechanical application of Rule 57C, is to be avoided, since it destroys the very benefit, which is otherwise available under the scheme right from stage one to the final stage. In the case of disintegrated production, credit is available from stage one by paying duty at each finished stage and taking credit of such duty in the other units down the line, whereas in the case of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t units. Para 3 & 4 of the judgment in Sterlite Industries (I) Ltd. (supra) - 3. We are also in agreement with the appellant s contention that Rule 57C debars taking of credit in respect of the inputs used in the manufacture of the final product, if final product is exempted from the whole of duty of excise leviable thereon or chargeable to nil rate of duty. As such, to attract the provisions of Rule 57C, two situations in respect of the final product should be satisfied. Either the fin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

it was held that clearance under goods under provision of 191BB for export without payment of duty would not get covered by the above expression. Reference was made to the advice received from the Ministry of Law dealt in the paragraph of 9 in the said decision. It was opined in the said letter of the Law Ministry that the term exempted has a definite connotation. The same as attributed to the notification issued by the Central Government. Similarly, the chargeable to nil rate of duty would ref .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

goods, but ultimately gets paid at the manufacturer s end. In these circumstances, we are in agreement with the decision rendered in the case of Bajaj Tempo and Jindal Polymers. 4. In only case of Escorts Ltd. v. C.C. Ex, Delhi [2003 (160) E.L.T. 623 (Tri.-Del.)] while interpreting Rule 57C of the Central Excise Rules, the Tribunal rejected the appellants claim of Modvat credit of duty paid on the inputs used in the manufacture of the parts, which were cleared without payment of duty to, ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e seen that the whole purpose of the Notification and the Rules is to streamlines the process of payment of duty and to prevent the cascading effect if duty is levied both on the inputs and the finished goods. Rule 57D(2), which has been extracted hereinabove, shows that in the manufacture of a final product an intermediate product may also come into existence. Thus in cases where intermediate product comes into existence, even though no duty has been chargeable to Nil rate of duty, credit would .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

iming benefit of Notification No. 217/86-C.E., dated 2nd April, 1986. As stated above, the Notification itself clarifies that the inputs can be used within the factory of production or in any other factory of the same manufacturer. By applying the ratio of the above decision, it becomes clear that Modvat credit of duty paid on the inputs used in the manufacture of final product cleared without payment of duty for further utilisation in the manufacture of final product, which are cleared on payme .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

her, in the case of Brindavan Beverages Pvt. Ltd. vs. CCE, Meerut (supra) this Tribunal has observed as under :- "7. A question arises as to when capital goods are used for manufacture of dutiable as well as exempted final product, whether for availing capital goods credit, the dutiable as well as exempted final product have to be manufactured simultaneously. In our view this is not necessary, and Cenvat credit would be admissible even if the capital goods are used for manufacture of dutiab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urya Roshni Ltd. (Supra) and Spenta International Ltd. v. CCE, Thane (supra) would become applicable. But, if at the time of receipt, the manufacturer had clear intention to use the capital goods for manufacture of dutiable as well as exempted final products, in such a situation just because at the time of receipt, he uses the capital goods for manufacture of exempted final product and subsequently he switches over to the manufacture off dutiable final product, the capital goods Cenvat credit ca .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

quot;. Further, in the case of Hindustan Zinc Ltd. vs. Union of India (supra), the Hon'ble Rajasthan High court has observed as under:- 27. It appears that the combined effect of Sub-Rule (9), sub-Rule (1) of Rule 57CC and the substantive scheme of availing Modvat credit in respect of inputs, the decisive date for the assessee s entitlement to Modvat credit is not postponed to the date of clearance. The operation of Rule 57CC is also to be seen as on the date the manufacturer becomes en .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ance due to certain contingency arising in future. In other words, the availing of Modvat credit is not postponed. When Rule 57CC operates at the time when the assessee claims his entitlement to Modvat credit and state of affairs existing at that time can alone be seen to find out whether the end product of the assessee which is more than one are chargeable to duty or are exempted from the whole of the duty or are chargeable to nil rate of duty. 33. It can be seen from yet another angle. In .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version