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2018 (12) TMI 165

CENVAT Credit - input services used in or relation to the generation of electricity sold outside the factory - the proportionate cenvat credit on input services used in relation to generation of Steam and Fly-Ash (exempt goods) reversed - Rule 6(3) of Cenvat Credit Rules, 2004 - time limitation - demand under Rule 6(3) of Cenvat Credit Rules for the period prior to April, 2010 in view of retrospective amendment by the Finance Act, 2010 - whether the demand confirmed by the Revenue under Rule 6(3) i.e. 5%/10% on value of exempted goods is legal and proper? - Held that:- The appellant is not disputing that the cenvat credit in respect of input services attributed to exempted goods namely Steam, Fly-Ash and non excisable goods i.e. electricity sold outside their factory, is not admissible and they have admittedly reversed the proportionate cenvat credit and also paid the interest from the date of taking credit till the date of reversal. - The appellant rightly availed the option of Sub Rule 3(A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of cenvat credit was made belatedly, however the appellant have paid interest for the period rig .....

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April, 2010 is sustainable in view of the retrospective amendment by the Finance Act, 2010. 2. The brief facts of the case are that the appellant is interalia engaged in the manufacture of excisable goods namely, Hot Rolled Steel Plates, Hot Rolled Steel Coils and MS Pipes. For the purpose of manufacture of said final product, the appellant set up their own Captive Power Plant within the same premises. The appellant consumed substantial amount of electricity and Steam generated by them in manufacture of final product and sold balance amount of electricity to independent buyers. The appellant have availed cenvat credit in respect of common input services which were used in manufacture of their dutiable final product and also generation of electricity, Steam and Fly-Ash which are sold outside the factory to individual buyers without payment of duty, either as the exempted goods or as non excisable goods. During the audit conducted of the appellant s record, it was noticed that the appellant have availed cenvat credit in respect of common input services and used in the manufacture of dutiable final goods as well as exempted goods i.e. Steam and Fly-Ash and non excisable goods namely, .....

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of cenvat credit Rules, the appellant immediately reversed proportionate amount of cenvat credit of common input services used in relation to electricity, Steam and Fly-Ash along with interest and informed to the department vide letter dated 30.05.2011 about reversal of the credit. He submits that when the credit attributed to the Steam, Fly-Ash and electricity has been reversed along with interest right from the date of taking credit till the date of reversal. The position is as if the cenvat credit not at all availed from day one, therefore, no contravention of the Rule can be alleged against the appellant. In support of his submission he placed reliance on the following judgments: Jay Balaji Industries Ltd 2017 (352) ELT 86 (T) Chandrapur Magnet Works (P) Ltd 1996 (81) ELT 3(SC) Swiss Parental P. Ltd 2014 (308) ELT 81 (T) Maize Products 2009 (234) ELT 431 (Guj) Anil Products Ltd 2010 (260) ELT 54 (Guj) Ashima Dyecot Ltd 2008 (232) ELt 280 (Guj) Maan Pharmaceuticals Ltd 2011 (263) ELT 661 (Guj) Star India Private Ltd (2005) 7 SCC 203 Bombay Dyeing & Mfg. Co. Ltd reported in 2007 (215) ELT 3 Star Coolers & Condensers (P) Ltd 2017 (352) ELT 77 (T) Genus Electrotech Ltd 201 .....

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pplicable law. They did not suppress any fact from the departmental authority and therefore, it cannot be said that the appellant suppressed or attempted to suppress any particulars that they sold Steam and electricity during the disputed period, therefore, the demand for extended period is not sustainable. He submits that on the basis of the above fact since no suppression is involved, the imposed penalty is also unsustainable. Without prejudice to the above aforesaid submission, it is submission of the Ld. Counsel that the appellant reversed the cenvat credit since the omission was pointed out by the audit wing, till then the appellant had not utilized cenvat credit availed of common input services used in generation of electricity and Steam. Availment of wrongful amount of cenvat credit was always lying unutilized during disputed period, therefore, it cannot be said that the appellant had any intention to evade payment of central excise duty. In the following decision it is held that penalty under Rule 15 cannot be imposed if wrongful availment of credit is lying undisputed in the Cenvat Credit Register. Grasim Bhiwani Textiles Ltd 2016 (332) ELT 865 (T) Strategic Engineers (P) .....

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inancial year. Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. From the plain reading of the Rule 6(3), it can be seen that the law provided three option to the assessee (I), (II) accordingly the assessee has option either to pay 5%/10% of value of exempted goods or pay an amount determined under Sub-Rule (3A) i.e. proportionate credit attributed to the exempted goods. The appellant rightly availed the option of Sub Rule 3(A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the cenvat credit till the payment/reversal of proportionate cenvat credit which create a position as if the appellant have not availed cenvat credit right from the date when cenvat credit was availed. Therefore there is no reason for imposing option under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods. This issue has been considered by this Tribunal time and again, t .....

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of receipt of this order. The Hon ble Tribunal in the case of Swiss Parental Pvt. Ltd 2014 (308) ELT 81 (T) held in para 7.3 that: 7.3 We find that the ratio of the above case laws is squarely applicable to the appellant s case. We, therefore, hold that if Cenvat credit attributable to inputs used in the manufacture of exempted final products is reversed along with interest subsequent to removal of exempted final products, then the appellant cannot be said to have taken credit of inputs used in or in relation to the manufacture of exempted final products, and they need not pay an amount @ 8% or 10% of the sale price of exempted final products. The adjudicating authority has worked out the demand of ₹ 88,41,543/- on the basis of 8% or 10% of the sale price of exempted final products cleared by the appellant during the material period, while the respondent claims that the input credit attributable to manufacture of exempted final products is only ₹ 7,85,573/-, which they have reversed. In the present case we observed from the case records that the appellant has furnished relevant data/documents available at pages 372 to 396 of the appeal papers filed in Appeal No. E/449/2 .....

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the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty. In the case of Aster Pvt. Ltd 2016 (43) STR 411, it was held that: The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing his exercise of option. The contention of the department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculated under the first option. I am afraid I cannot endorse this contention. The said rule does not say that on failure to intimate, the manufacturer/service provider would lose his choice to avail second option of reversing the proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to ac .....

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ment whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any. 7. In view of the above, the issue is no longer res-integra, therefore, the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. As regard the submission of Ld. Counsel regarding the limitation, we find that firstly, the appellant had not utilized the cenvat credit attributed to the exempted goods, secondly the fact regarding the availment of credit and manufacture and clearance of exempted and non excisable goods are very much on record, therefore, the suppression of fact cannot be attributed on the part of the appellant. We also find that since the issue regarding reversal of cenvat credit under Rule 6(3) is contentious and various cases on the same issue have been made .....

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