TMI Blog2018 (8) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowing taking of credit to become eligible for any duty / tax exemption is to disallow double enrichment to the assessee in such cases. Discernably therefore, when credit has been taken, the duty / tax exemption cannot be availed. However if such credit taken is reversed with interest even after clearance of final products, there is no reason why the assessee cannot thereafter become ab-initio eligible for the benefit of such exemption notification - though cenvat credit had been taken by the appellant herein, if it is reversed with interest, after clearance of the final products even at the Tribunal stage, the benefit of Notification No.39/2009-ST dt. 23.09.2009, which otherwise mandates non-taking of credit for duty exemption, will now become available to the appellant. The Annexure-I to the SCN gives the value of the raw materials used in the manufacture of the IMFL under contract bottling during the impugned period. As the details have been worked out by the department themselves it appears to reason that condition (b) of the notification namely, “there is documentary proof specifically indicating the value of such inputs “ is also fulfilled. - thus, the appellants shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilized such credit for payment of service tax. It therefore appeared to department that appellants had failed to satisfy the condition stipulated in the said Notification No.39/2009-ST and as such they would be liable to pay service tax on the gross amount charged by them from USL. In adjudication, the Commissioner vide impugned order dt. 30.09.2015 confirmed demand of service tax as proposed in the SCN with interest thereon and also imposed penalty under Section 77 (1), 77 (2) and equal penalty under Section 78 of the Finance Act, 1994. Hence the appellants are before this forum 2. When the matter came up for hearing, on behalf of the appellant, ShriS.Sankaravadivelu made oral and written submissions which can be broadly summarized as under : i) The Revenue vide their letter dated 05.12.2013 informed the appellants about the availment of Cenvat Credit based on Debit Note as well as availment of cenvat credit on capital goods and exemption under Notification No.39/2009- ST . The Revenue has issued SCN on the first issue on 10.10.2014. Then issued SCN on the issue appealed now, on 29.01.2015 invoking extended period of limitation. As the first SCN was issued for alleged irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that they would pay the penalty imposed under Section 77 of the Act. viii) As the appellants have already made predeposit of ₹ 1,31,80,000/- against the confirmed demand of ₹ 1,22,93,434/- the credit availed should be considered as having been reversed only interest is then required to be paid which the appellant would be paying up as per applicable rates. 3. On the other hand, on behalf of the Revenue, Ld. Commissioner (AR) Ms. Hemavathy made oral and written submissions which can be broadly summarized as under : i) It is an admitted fact that the appellant provided taxable service falling under the category of Business Auxiliary Service . The appellant has also admitted the taxability of the bottling activity falling under the aforesaid category of Service. The only dispute raised in this case is that the appellant had not adopted the correct valuation for their taxable services. They have availed the exemption under Notification No.39/2009 ST dated 23.09.2009 by excluding the value of the materials used for bottling charges from the value of taxable service. As the condition for availing such exemption viz., non-availment of CENVAT Credit on the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws : (i) Go Go International P. Ltd vs Commr. of Cus. (Export), Nhava Sheva 2010 (255) ELT 81 (Tri. Mumbai) (ii) Kamra Bottling Company vs. CCE, Jaipur 2009 (233) ELT 329 (Raj.). 4. In response, Ld. Advocate pointed out that as per the ratio laid down by the Allahabad High Court in Hella Minerals Water (supra), reversal of credit should be done before availing the benefits of notification and time of reversal is not material. 5. Heard both sides and have gone through the facts of the case. We intend to take up the various arguments of the appellant one by one. 6.1 On the issue of limitation, Ld. Advocate has referred to a letter dt. 5.12.2013 of the department wherein issue of wrong availment of cenvat credit based on debit note as well as the issue in the present appeal had been raised by the department and that since SCN was issued on first issue on 10.10.2014, the issue of SCN dt. 29.01.2015 on the dispute in the appeal would be hit by limitation. A perusal of the said letter, filed in page 101 of compilation of Vol-I, we find that this communication seeks to convey various audit objections as the resultant of audit conducted on the appellants. Thus DAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the notification for calculating taxable value, the value of inputs excluding capital goods, used for providing said service is to be excluded, provided the assessee satisfies the conditions (a), (b), (c) thereof; in particular, not taking any cenvat credit and there is documentary proof indicating the value of such inputs. Evidently then, the notification seeks to exclude predominant portion of the materials‟ cost. In any case, we find that the taxability of activity of contract bottling has already been confirmed by the High Court of Delhi in the Carlsberg India case (supra). The appeal filed by ISWAI has only been admitted by the Hon ble Apex Court. However, no stay on taxability has been ordered by the Hon ble Apex Court. Hence this contention of the appellant also does not stand to scrutiny and is therefore rejected. 6.4 As alternate plea, the appellants have volunteered to pay up the amount of ₹ 1,22,93,434/- being the amount of service tax paid through cenvat credit along with applicable interest. Relying upon the Hon ble Apex Court judgment in Chandrapur Magnet Wires (supra) and that of the Hon ble High Court of Allahabad in Hello Minerals Water (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process could be reversed. Since the credit has been taken for the duty paid on the inputs in the ledger maintained by the assessees, the assessee cannot be heard to say that no credit of the duty has been taken by it under Rule 57A. 6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under :- The credit account under MODVAT rules may be maintained 3. chapterwise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done at the Tribunal‟s stage. The Hon ble High Court referred to the Tribunal decisions in the case of Tube Investments of India [Final Order No.795/2012]; High Line Pen Vs CCE- Final Order No.359/2003 [2003 (158) ELT 168 (Tri)]; Kitply Industries Ltd. - 2001 (130) ELT 236 (Tribunal) and Bharat Earth Movers Ltd. 2001 (136) ELT 225 (Tribunal) and held that the petitioner therein is entitled to benefit of Notification No.15/94-CE even when reversal of modvat credit on the inputs has been done after clearance of the final product. The relevant portion of the Hon ble High Court order is as under : 24. In fact the decision of the five Member Larger Bench of the Tribunal in Franco Italian Company (supra) was followed by three Member Bench of the Appellate Tribunal in the case of ICON Pharma and Surgical (P) Ltd., 2000 (40) RLT 918. 25. The Tribunal again in a three Member Bench decision in the case of Tube Investment of India, Final Order No. 795/2002, wherein the specific issue was whether the reversal of credit subsequent to removal of goods, was fetal to the extension of benefits of the notification considered the matter at length. The majority decision upheld the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Apex Court in the case of Precot Meridian Ltd. - 2015 (325) ELT 234 (SC) referring to Five-Member Bench of the Tribunal in Franco Italian Co. Pvt. Ltd. Vs UOI 2000 (120) ELT 792 (T-LB) and that of the Allahabad High Court order in Hello Minerals (supra), has affirmed the view that reversal of cenvat / modvat credit amounts to non-taking of credit. The relevant portion of the said judgement is reproduced below : Indubitably, the benefit of exemption Notification No. 5/99-C.E., dated 28-2-1999 is available subject to certain conditions and one of the conditions is that the assessee had not taken any credit under Rule 57A or Rule 57B or Rule 57Q of the Central Excise Rules, 1944, in the process of dyeing, printing, bleaching or mercerising in the manufacture of dyed, printed, bleached or mercerised yarn. 2. As mentioned above, this Notification was issued on 28-2-1999. The product of the respondent is covered by the description of goods at Serial No. 133 of the Table annexed with the General Exemption Notification. The assessee, however, had utilized the MODVAT credit in the previous two years prior to 28-2-1999. As per the assessee, after the issuance of this n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and discussed in paras 6.3 to 6.7 as above, we are of the considered opinion that even at the Tribunal stage if the appellant reverses the credit amount of ₹ 1,22,93,707/- taken during the impugned period and also pays up the interest liabilities applicable thereon, condition (a) of Notification No.39/2009-ST will be satisfied and the exemption provided in the notifications will be available to them, and the net service tax liability will then be calculated as per the provisions of that notification. 7.3 We also find that the Annexure-I to the SCN gives the value of the raw materials used in the manufacture of the IMFL under contract bottling during the impugned period. As the details have been worked out by the department themselves it appears to reason that condition (b) of the notification namely, there is documentary proof specifically indicating the value of such inputs is also fulfilled. 8. In the event, we are of the considered opinion that the appellants should be extended the benefit of Notification No.39/2009-ST dt.23.09.2009 subject to the appellants paying up the disputed quantum of credit taken during the impugned period and also paying up the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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