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TMI Blog2020 (12) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... against the confirmed demand. The demand relates to the period 16.07.2012 to 31.03.2016. 2. The facts of the case in brief are: (i) The appellant, an integrated steel plant engaged in manufacture of sponge iron and pig iron, which is further used in its factory at Shyamraipur, Kharagpur, West Bengal for manufacturing MS Billets, MS Wire, Sinter, Ductile Iron Pipes ("DI Pipes"), etc. removes some quantity of the DI Pipes without payment of duty in terms of Notification No. 12/2012-CE dated 17.03.2012, which exempts pipes and pipe fittings needed for delivery of water for human/animal consumption. However, until the time the appellant‟s liability in that regard was pointed out to it by the jurisdictional Range Superintendent, the appellant, until early 2012, was neither maintaining separate account of common input/input services used for manufacture of dutiable as well as exempted goods nor was it making payment of the amount equal to 5% or 6%, as the case may be, in terms of Rule 6(3) of the Cenvat Rules, 2004 (hereinafter referred to as the "Cenvat Credit Rules"). Upon being so pointed out by a letter dated June 19, 2012 of the Range Superintendent, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services, the method as adopted by the appellant of apportionment after manufacture of the final product was not in compliance with Rule 6(2) of the Cenvat Credit Rules. The appellant had also not applied the apportionment method for all invoices of common input services and therefore also the provision of Rule 6(2) of Cenvat Credit Rules was violated. Hence the provisions of Rule 6(3)(i) was applicable and the appellant was required to pay an amount equal to 6% of the value of the exempted goods; (iv) On the appellant filing its reply dated 07.11.2017 and personal hearings in the matter during which the appellant submitted further written submissions dated 20.11.2017, 16.01.2018 and 23.04.2018, the impugned order was passed by the Commissioner, holding amongst other that the method of back calculation and approximation, as adopted by the appellant to compute the quantity of inputs used in the manufacture of exempted final products, was "beyond the provision prescribed in the said sub-rules meant for specific purposes" (paragraph12.29 of the said order) and that "the best method that can be applied in first stage is the application of provision to Rule 6(3)(i) of the Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand confirmed in the impugned order under Rule 6(3)(i) of the Cenvat Credit Rules is not sustainable for the reason that the appellant has not availed the cenvat credit of duty/tax paid on inputs and input services used for manufacture of exempted DI Pipes, inasmuch as reversal of duty/tax paid on inputs and input services attributable to the manufacture of DI Pipes, tantamount to having not taken such credit at all. Further, it is settled law that in case of common inputs and input services used in or in relation to the manufacture of dutiable and exempted final products, proportionate to use of input and input services in exempted products, if reversed, the assessee is not required to make payment in terms of Rule 6(3)(i) of the Cenvat Credit Rules. In support, the appellant relied upon the following decisions: (i) Commissioner of Central GST and CX Vs. Himmat Glazed Tiles, 2018 (15) GSTL 486 (Guj) (ii) Commissioner of C.Ex. Vs. Maan Pharmaceuticals Ltd., 2011 (263) ELT 661 (Guj) (iii) Rukmani Power and Steel Limited Vs. Commissioner of C.Ex.& ST, 2017 (354) ELT 144 (T) - Affirmed by the Chhattisgarh High Court in Commissioner of C.Ex.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I Pipes were reflected in the appellant‟s ER-1 returns since July 2012, but also the same was confirmed during the EA-2000/CERA audits during 2012-13 to 2014-15. Thus the Department was fully aware of all relevant facts, including the manner of compliance of Cenvat Credit Rules by the appellant. Therefore, none of the ingredients of Rule 15(2) of the Cenvat Credit rules/Section 11AC of the Act are satisfied to invoke the extended period of limitation. In support of this contention the appellant relied upon the following decisions: (i) Commissioner of C.Ex. Vs. Pragathi Concrete Products (P) Ltd., 2015 (322) ELT 819 (SC) (ii) Continental Foundation Jt. Venture Vs. Commr. of C.Ex., 2007 (216) ELT 177 (SC) (iii) Uniworth Textiles Ltd. Vs. CCE, 2013 (288) ELT 161 (SC) (iv) Pushpam Pharmaceuticals Company Vs. CCE, 1995 (78) ELT 401 (SC) (v) Cranes and Structural Engineers Vs. CCE, 2017 (347) ELT 112 (T). (f) On the same ground not only that the demand confirmed in the impugned order is barred by limitation, but also the penalty imposed under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act is not sustainable, the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate account of common inputs / input services can only be done by back calculation method, which has been undisputedly adopted by the appellant in the instant case. 8.2 From both the show cause notice and the impugned order we find that it is an undisputed fact that it is not possible to differentiate the DI Pipes between those exempted and dutiable at the point of or prior to its production and thus it is not possible to keep a separate account of the inputs/input services meant for use or intended for use for manufacture of exempted D.I Pipes inasmuch as the exemption from duty is determined at the time of clearance of the D.I Pipes under Notification No. 12/2012-CE dated 17.03.2012. In the show cause notice this fact is acknowledged as follows: "it was simply impossible to maintain separate account for inputs where there is only one blast furnace where basic raw material is fed for production of Pig Iron which is then transferred to DI plant as well as Billet plant, M S wire Rod plant and Sinter plant". In the impugned order also in paragraph 12.3 it is observed as under: "In the entire process it is obviously not possible to differentiate the DI Pipes being exempted or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itially availed cenvat credit on the exempt product also. However, subsequently, it appears that such credit so availed was reversed with interest. The department however still objected to such procedure. 3. The appellate authority and the Tribunal held that since the assessee had reversed the cenvat credit with interest, no further adverse consequence should follow. We notice that this Court in case of Commissioner Vs. Ashima Dyecot Ltd. reported in 2008 (232) ELT 580 has observed that reversal of credit amounts to non-availment. 4. We do not find any error in the view of the Tribunal. Tax appeals are dismissed." 8.4.2 The Hon‟ble Bombay High Court also in the case of Commissioner of Central Excise Vs. IVP Ltd., 2017 (349) ELT 18 (Bom) upheld reversal of proportionate credit as compliance with requirement of Rule 6 of the Cenvat Credit Rules even if an assessee had failed to maintain separate account. In paragraph 5 of the judgment it was held as follows: "5. The findings essentially are of fact. However, only one question which was projected as a substantial question of law, now appears to be concluded against the Revenue on account of the retrospectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the value of final exempted product, in terms of provisions of Rule 6(3)(b) of the Cenvat Credit Rules, initiated proceedings against them for recovery of amount of Rs. 26,29,898/-. The same was confirmed by the original adjudicating authority. 4. However, on appeal Commissioner (Appeals) took note of the fact that the assessee has already reversed the cenvat credit attributable to inputs and input service used in the manufacture of exempted final product and as such, applicability of Rule 6(3)(b) is ruled out. Accordingly, he set aside the impugned order of the lower authorities and allowed the appeal. 5. Hence, the present appeal by the Revenue. 6. We find that Revenue is not disputing the fact of reversal of proportionate credit. However, the only grievance of the Revenue is that such reversal has taken place subsequent to the clearance of goods. 7. We find that the issue is no more res integra. Commissioner (Appeals) has granted relief to the assessee by following the Larger Bench decision of the Tribunal in the case of Franco Italion Co. Pvt. Ltd. [2000 (120) ELT 792] as also the Hon'ble Supreme Court decision in the case of Chandrapur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against. In the impugned judgment the Tribunal has decided the issue in favour of the assessee relying upon the aforesaid two decisions. 5. We, thus, do not find any reason to interfere with this order. The appeal is dismissed accordingly." This principle would also apply to the instant case. 8.4.6 The facts of the present case being similar to the abovementioned decisions, the principle laid down therein is squarely applicable. Respectfully following the same we therefore hold that the demand of Rs. 58,96,13,230/- confirmed by the impugned order is unsustainable since the appellant has reversed the cenvat credit on input and input services attributable to the exempted product, including in some cases with interest if applicable. 9. Re: Issue No. (iii) 9.1 The relevant records show that till early 2012 the appellant was not maintaining separate accounts nor was it reversing the credit or paying any amount in terms of Rule 6(3)(i) of the Cenvat Credit Rules. Only when the jurisdictional Range Superintendent drew the appellant‟s attention to this fact by a letter dated June 19, 2012 and requiring the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was observed, inter alia, as follows: "............................................................................................. The only question is whether payment of duty on some goods cleared in the beginning of the financial year could be considered as de facto opting out of the benefit of the exemption notification. We find no warrant for such a view. The notification calls for specific opting out by a manufacturer. There was no requirement to opt in. In the present case, the assessee has also written to the department informing that it was wanting to avail the exemption notification. In the face of such opting in, there was no justification for interpreting the payment of duty on some goods as opting out. Moreover, the assessee has also explained his reason for clearing some goods on payment of duty at the beginning of the financial year; it required some time to compute the aggregate value of the clearances made during the preceding financial year, so as to be sure that it had not exceeded the qualifying value limit during the preceding financial year. Thus, paying duty on the goods cleared during the opening days of the Financial Year was only erring in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of Cranes & Structural Engineers Vs. Commr. of C. Ex. (supra). It has been observed and held therein as follows: "4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing the exercise of his option. The argument 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 calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Subrule (3A) of Rule 6 is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, as per principles laid down by the Apex Court consistently, there can be no case of suppression of any material fact or wilful misstatement or contravention by an assessee of any provision of the Act or the rules made thereunder with intent to evade duty/tax and hence there can be no invocation of the extended period of limitation in terms of the Proviso to Section 11A(1) or Section 11A(4) of the Act. The demand in such cases can only be for the normal period under Section 11A(1) of the Act. For the same reasons no penalty can be imposed upon an assessee in such cases in terms of Rule 15(2) of the Cenvat Credit Rules or Section 11AC of the Act. 10.3 In the present case the show cause notice was issued on August 2, 2017, beyond the normal period of 2 years prescribed under Section 11A(1) of the Act. Consequently, on respectful application of the principle abovestated laid down by the Hon‟ble Supreme Court, the demand confirmed by the impugned order is also barred by limitation. 11. Re: Issue No. (v): 11.1 For the reasons abovestated, the demand of interest in terms of Section 11AA of the Act and penalty imposed under Rule 15(2) of the Cenvat Credit Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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