TMI Blog2019 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of free supplies as well as amortized cost - also the appellant has used the funded machinery for dutiable goods and has paid royalty to VSSC for such use. All these aspects have to be considered while arriving at the value of exempted clearances - All the aspects have to be considered while arriving at the value of exempted clearances - matter require to be remanded to the adjudicating authority for reworking the exempted clearance and that has to be reversed by the appellant. Non reversal of input services credit for exempted goods manufactured - period after 1.4.2008 - Held that:- The appellant fairly concedes the demand in this regard. They only contest the inclusion of the entire amortized value of plant and machinery funded by VSSC, on the grounds, inter alia that the impugned plant and machinery was also used to manufacture dutiable goods for customers other than VSSC - for the purpose of reworking the credit that has to be reversed under this issue, the matter remanded along with the above two issues to the adjudicating authority. Penalty - Held that:- All these issues are in the nature of interpretation of law or have resulted from mistakes and inadvertent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 Availment of credit on capital goods used exclusively in the manufacture of exempted goods. Rs.18,53,440 2. In all, the impugned order confirmed total demand of ₹ 2,32,51,011/- along with interest thereon and also imposed equal penalty under Rule 15(2) read with Section 11AC of the Central Excise Act, 1944. Hence this appeal. 3. When the matter came up for hearing ld. counsel Shri M. Karthikeyan, made oral and written submissions which can be broadly summarized as under:- 3.1 The appellant is not contesting the demand relating to Sl. No. 1 (Rs.49,15,448/-), Sl. No. 2 (Rs.4,73,544/-), Sl. No. 7 (Rs.2,71,005/-) and Sl. No.8 (Rs.18,53,440/-). However, he contends that availment of CENVAT credit in these cases had happened only due to inadvertent error / clerical mistake and not with any malafide intention. Further, the appellant had huge credit balance in the CENVAT credit account from the date of taking such credit and they had not utilized such credits taken. Hence demand of interest and also imposition of penalties are not sustainable. 3.2 The ld. counsel handed over a copy of their letter dated 26.5.2010 address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined in terms of Section 4 or 4A of Central Excise Act, 1944, which has not been followed. 3.5 It was further submitted that appellant has reversed the credit taken on LPG/Consumables used for such exempted goods manufactured on job work basis by taking into account the job charges received as the value of exempted products. However, in the impugned proceedings, it has been alleged that the value of FOC materials supplied for job work have not been taken into account. Similarly, in the impugned proceedings it is alleged that the entire amortized value of the plant and machinery funded by VSSC also has not been taken into account while arriving at the value of the exempted goods for the purpose of the reversal made in cases where goods were manufactured on their own. The explanation in Rule 6(3A) is effective prospectively only from 1.4.2008 onwards. Notwithstanding the same, the appellant submits that in respect of common inputs used in the exempted goods amount equivalent to CENVAT credit attributable to inputs used have to be reversed and the formula prescribed with effect from 1.4.2008 will apply only for input services and not for inputs used. Hence the demand propose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gments, the Hon ble Supreme Court has held that waste and scrap is not a manufactured product and therefore cannot be excisable. 4.1 With respect to the allegation concerning failure to include amortized cost of the funded facility provided free of cost by VSSC, ld. AR pointed out that the appellant is contending that the quantum of amortization should be less by adopting wrong calculation and excluding the value of free clearances from both numerator and denominator. Further, the procedure of arriving at the value for applying the formula under Rule 6(3A), though was introduced with effect from 1.4.2008, it was just and fair that the same should be applied even for the period prior to 1.4.2008 also. 5. Heard both sides. 6.1 The appellants are availing following exemption for the excisable products manufactured and cleared from time to time:- Notification 6/2006 dated 20.3.2006 Parts of wind mills Notification 10/97 dated 1.3.1997 Steel forgings / steel rings Notification No.64/95 dated 16.3.95 Steel forgings / steel rings and aluminum forgings / rings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ₹ 95,07,123/- and have paid this amount. They have contended that since the inputs are contained in the waste and scrap and when such scrap is cleared on payment of duty, they are eligible for the credit of inputs contained in scrap generated during manufacture of exempted goods. The appellant has relied on the ratio laid down in the case of Albert David (supra). In the said case, the Tribunal had held that CENVAT credit is not available in the inputs contained in scrap though the scrap is cleared on payment of duty. The said decision was reversed by the Hon ble High Court of Allahabad and it was held that appellant is eligible for the credit of the inputs (plastic scrap) contained in waste and scrap. On perusal of the decision, we find that the law in force during the relevant time was the erstwhile MODVAT Credit Rules. Referring to the definition under Rule 57AA(C) as well as circular of the Board dated 29.8.2000, the Hon ble High Court observed that waste and scrap was also final products falling within the definition of Rule 57AA(C) and therefore the credit of the inputs contained in waste and scrap is eligible. However, in the matter before us, it is the CENVAT Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry funded by VSSC. The demand has been raised by the department by including the cost of raw material supplied free by the customers of VSSC and MIDHANI and also the amortized cost of the plant and machinery which was funded by VSSC. It is seen from the records that the appellant furnished Chartered Accountant s certificate as to the funded facility of machineries. Based on the above certificate and other documents, the amortized cost and the material cost has been arrived by the department and the demand for the period September 2005 to March 2008 has been arrived to be ₹ 10,33,314/- and the demand for April 2008 to March 2010 has been arrived as ₹ 16,51,465/-. It is seen from the records as well as from the submissions made by the ld. counsel for the appellant that while arriving at the value of exempted products for the purposes of reversing the credit as per Rule 6(3), appellant has taken into consideration only the job charges. It is their contention that the Explanation in Rule 6(3A) has been introduced only with effect from 1.4.2008. This Explanation lays down the formula to arrive at the value of exempted clearances. The appellant therefore contends that the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, we remand the matter along with the above two issues to the adjudicating authority. 6.7 The appellant has submitted that Sl. No. 1, 2, 7 and 8 are not contested and they are confining their plea with regard to the waiver of penalties imposed. It is brought out from the submissions as well as from the records that the appellant had enough credit balance during the relevant period. They had reversed major part of the credit during the investigation itself and as and when pointed out by the department and this was done much before issuance of the show cause notice. We further, take note that all these issues are in the nature of interpretation of law or have resulted from mistakes and inadvertent errors on calculating the amounts to be reversed. Taking all these aspects into consideration, we are of the view that the penalties imposed on all the issues cannot sustain and require to be set aside, which we hereby do. 7. From the discussions made above, we hold that a. The demand of ₹ 1,29,52,945/- in respect of Issue No. 3 is legal and proper and does not require interference. The appeal on this issue is dismissed. b. The issues at Sl. No. 4, 5 and 6 are remanded f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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