TMI Blog2017 (6) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... ant is liable to pay 10% of the value of exempted goods or not? - Held that: - As there is difference of opinion between the members, therefore, the matter be placed before the Hon’ble President to appoint 3rd Member to resolve the issue. - Appeal No. E/1272/2008-Ex (DB) - Final Order No. 61025/2017, Interim Order No. 9/2017 - Dated:- 5-6-2017 - Mr. Ashok Jindal, Member (Judicial) And Mr.Devender Singh, Member (Technical) Ms.Krati Somani, Advocaate for the appellant Shri Satyapal, AR for the respondent ORDER Per Ashok Jindal The appellant is in appeal against the impugned order denying the credit of ₹ 1,96,83,096/- and demand was confirmed under Rule 6(3) (b) of Cenvat Credit Rules, 2004 to the tune of ₹ 47,84,763/- alongwith education cess @ 2% of the total demand and penalty of equivalent amount of ₹ 1,96,83,096/- alongwith penalty of ₹ 25 lakhs under Rule 25 of Central Excise Rules, 2002. 2. The brief facts of the case are the appellant is engaged in the manufacture of footwear under the brand name of Liberty. The appellant is also undertaking packing/repacking and labelling/re-labelling of imported footwear. This activity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emise that as the appellant is manufacturing dutiable as well as final exempted products and are availing the credit on the common inputs/input service, therefore, the appellant is required to pay 10% of the value of the exempted goods cleared by the appellant during this period. In these sets of fact, the show cause notice was issued on 14.02.2007 alleging that during the period July, 2005 to June, 2006, the has wrongly availed credit on duty paid imported footwear and packing material as footwear were exempted from payment of duty. It was alleged that the appellant has no option but to avail the exemption notification which is mandatory in terms of section 5A (1@) of the Central Excise Act, 1944. In addition to this, it is further alleged that manufacture of footwear is fully exempted from payment whole of excise duty, the cenvat credit was not allowed on such quantity inputs and input service which are used in the manufacture of final exempted products in terms of Rule 6 (1) of Cenvat Credit Rules for the period November, 2004 to June, 2005, the appellant is liable to pay an amount 10% of the exempted goods in terms Rule 6 (3) (b) ibid. The show cause notice was adjudicated and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts and input services used for manufacture of exempted goods also. It is submitted by the learned Counsel that the appellant is receiving inputs in the form of packing material which are to be used in manufacture of footwear. It is her submission that the such packing material received in respective godowns i.e. received separately in manufacturing unit of excisable goods, therefore, the question of availing credit on the packing material used for manufacturing exempted goods does not a rise. The invoices of packing material used in the exempted final products have been produced and on the said invoices no credit has been taken. With regard to this contention, the learned Commissioner has not given any credence. It is further submitted that with respect to common services used by the appellant for dutiable and as well as exempted final products, the appellant has already reversed the proportionate credit, therefore, in terms of Rule 6 (3) (b) of Cenvat Credit Rules, the demand is not sustainable. To support this contention, she relied on the following decisions: (a) Chandrapur Magnet Wires (P) Ltd. -1996 (81) ELT 3 (SC) (b) Hello Minerals Waters (P) Ltd.-2004 (174) ELT 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct which are reproduced as under:- (1A) for the removal of the doubts, it is hereby declared that where an exemption under sub-section (1) in respect of any excisable goods from the whole of the duty of excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods shall not pay the duty of excise on such goods. 13. Bare reading of the said provision indicates that a manufacturer will not have an option to pay duty only where the goods are exempted and the exemption granted is absolute. Admittedly, in this case, the exemption granted Notification No.6/02-CE dated 1.3.2002 and 5/06-CE dated 1.3.2006, is not absolute but conditional. Therefore, in the light of the decision of this Tribunal in the case of Balkrishna Paper Mills Ltd. (supra), wherein this Tribunal has observed as under:- It would be seen from the said Section 5A that the Central Government is empowered to exempt generally either absolutely or subject to such conditions (to be fulfilled before or after removal) as may be specified in the Notification from the whole or any part of the duty. Further, a reading of Section 5A(1A) shows that for the removal of doubts, it is hereby d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance of the exempted goods, it would still amount to taking the credit and exemption will not be available. The appellants, in the case before us, have not only reversed the credit of ₹ 70,21,383/- but also paid the interest of ₹ 4,71,189/-. We feel that by doing so, the appellants, have undone the act of taking/utilizing the credit and in the light of the Allahabad and Gujarat High Court judgments supra, it amounts to not taking the credit and, therefore, they are not required to pay an amount equal to 10%. We hold that the appellant has not taken the credit on inputs i.e. packing material used in the manufacture of exempted final goods and reversed the proportionate credit availed on common input service, the appellant is not liable to pay 10% of the value of the exempted goods. Therefore, the demand of ₹ 47,84,763/- is also set aside. 17. In view of the above observation, we set aside the demands proposed in the show cause notice are not sustainable against the appellant. Consequently, the impugned order is set aside and the appeal is allowed with consequential relief, if any. ( Pronounced in the open court on ) Per : Devender Singh, Member (T) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y had taken the above said CENVAT Credit and duty liability had been discharged in respect of goods in question; that they were taking CENVAT Credit of the duty paid on packing materials such as Shoe Boxes and Cartons used in packing/repacking of these imported Footwear, that no separate records were maintained in respect of the above said packing materials which were used in exempted Footwear by virtue of the above mentioned Notification No. 6/2002-CE dt. 01.03.2002, as amended, as well as in other manufactured dutiable Footwear; that they were not paying 10% of the value of clearance of repacked imported Footwear which were cleared by them, in terms of Rule 6 (3) (b) of CCR, 2004; that they had cleared Footwear imported vide 12 Bills of Entry (Annexure-C) to this Show Cause Notice) without availing CENVAT credit and without payment of duty; that they were not availing the benefit of Notification No. 6/2002-CE dt. 01.03.2002, as amended, in Karnal unit, while the benefit of above Notification was availed in their Godown at Sector-5, Namastey Chowk, Karnal. However, all the functions relating to imported footwear including receipt and dispatches are carried out on behalf of M/s LSL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is on the appellants in terms of Rule 9(6) of CCR, 2004. Extended period is thus invokable and penalty under Rule 15 of CCR, 2004 read with Section 11AC has rightly been imposed. In this context, I also place reliance on the judgment of Hon ble Allahabad High Court in the case of CCE, Ghaziabad Vs. Rathi Steel Power Ltd. 2015 (321) ELT 200(All.) where it was held as under:- 32. We further find that under Rules, 2004, a burden is cast upon the manufacturer to ensure that Cenvat credit is correctly claimed by them and proper records are maintained in that regard. 33. The assessee, in response to the show cause notice had stated that there is no provision in Central Excise Law to disclose the details of the credit or to submit the duty paying documents, which in our opinion is false and an attempt to deliberately contravene the provisions of the Act, 1944 and the rules made thereunder with an intent to evade the duty. 34. In our opinion, the facts of the present case clearly suggest willful suppression of material facts by the assessee as well as contravention of the provisions of the Act and rules framed thereunder with an intent to evade the demand of duty as would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted imported footwears into their registered premises. Whereas, in Para-5 of the said show cause notice, it has been stated on 07.09.2006, the statement of Shri Arun Kumar, Authorised Signatory was recorded under Section 14 of Central Excise Act, 1944 who inter-alia stated that they had imported 30 containers of footwears and out of which 17 containers were cleared from their Karnal Unit after packing/ re-packing or labelling/ re-labelling, on payment of duty and Cenvat credit of CVD, Cess etc. was availed and rest of the 13 containers were directly off-loaded at their Namaste Chowk, Karnal and the same were cleared after being packing/ re-packing or labelling/re-labelling and no Cenvat credit was availed on those footwears as well as on the packing materials. Since the statement of Shri Arun Kumar, the authorised signatory of the appellant was recorded under Section 14 of the Central Excise Act, 1944, it was anadmissible evidence. The Commissioner who framed the charges in the said show cause notice dated 14.02.2007 has ignored the such important admissible evidence and therefore, the said show cause notice is not tenable in law. For the said reason, I agree with the opinion e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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