TMI Blog2020 (12) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... f an amount equal to 6% of the value of the exempted goods and 7% of the value of the exempted services in terms of Rule 6(3)(i) of the Cenvat Credit Rules? - HELD THAT:- It is acknowledged both in the impugned order and the show cause notice that the appellant had reversed on proportionate basis the duty/tax paid on inputs and input services which were used, to the extent they related to exempted final products. There is no denial of this fact although issues have been raised regarding alleged discrepancies in the quantum of the reversals made, which we find had been duly attended to by the appellant by way of reversal with interest. It is also acknowledged in the impugned order that in all such cases of reversal, wherever required, the same has been effected along with payment of interest - It is now a settled proposition that reversal of cenvat credit even after manufacture of the goods and/or clearance thereof amounts to not taking of the credit on the exempted goods and that in case of common inputs and input services used in or in relation to the manufacture of dutiable and exempted final products, credit proportionate to use of inputs and input services in exempted products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. Whether in the facts and circumstances of the case penalty equivalent is imposable upon the appellant under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act? - HELD THAT:- The demand of interest in terms of Section 11AA of the Act and penalty imposed under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act are also unsustainable. Appeal allowed - decided in favor of appellant. - Excise Appeal No.78563 of 2018 - FINAL ORDER NO.75646/2020 - Dated:- 19-11-2020 - SHRI P. K. CHOUDHARY, JUDICIAL MEMBER AND SHRI P. ANJANI KUMAR, TECHNICAL MEMBER Dr.Samir Chakraborty, Sr.Advocate Shri K.K.Acharya, Advocate for the Appellant Shri S.Mukhopadhyay, Authorized Representative for the Respondent ORDER This appeal is against the adjudication order dated 19.06.2018 passed by the Commissioner, CGST and Central Excise, Hald ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pportionment method, after manufacture of the DI Pipes. This method of compliance with the provisions of Rule 6(2) of the Cenvat Credit Rules, reflected in the appellant‟s ER-1 returns, continued during the period after July 2012 and the same were supported by Chartered Accountant‟s Certificates. (iii) Pursuant to investigation by the Directorate General of Central Excise Intelligence, Kolkata Zonal Unit ( DGCEI ) initiated in July 2015, a show cause notice dated August 2, 2017 was issued by the Additional Director General, DGCEI, requiring the appellant to show cause to the Commissioner of CGST Central Excise, Haldia Commissionerate as to why an amount of ₹ 58,96,13,230/-, allegedly payable by the appellant in terms of Rule 6(3)(i) of the Cenvat Credit Rules during the said period, should not be recovered from it with interest and as to why penalty should not be imposed on the appellant under the stated provisions of the Act/Central Excise Rules, 2002. It was alleged that: (a) the appellant had exercised the option under Rule 6(3)(iii) of the Cenvat Credit Rules, to maintain separate accounts of receipt/consumption of inputs purportedly in the month of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods. On the other hand, w.e.f. 01.03.2011 the said Rule 6(2) provides for maintenance of separate accounts of inputs used /receipt and use of input services. Thus, as per the said Rule 6(2) in force during the relevant period (July 2012 to March 2016), maintenance of separate account of physical stock of inputs meant for use/intended for use for manufacture of dutiable/exempted goods is not required. However, separate account of such common inputs/input services is required to be maintained after the common inputs/input services are used and particularly in the context of the facts and circumstances of the instant case, it can only be achieved by back calculation method, as undisputedly adopted by the appellant. (b) Both the show cause notice and the impugned order unequivocally confirms that it is not possible to keep a separate account of the inputs/input services meant for use/intended for use for manufacture of exempted DI Pipes inasmuch as the exemption from duty is determined only at the time of clearance of the DI Pipes under Notification No. 12/2012-CE dated 17.03.2012. Therefore, adopting back calculation method to determine the quantum of inputs/input services u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of CGST C.Ex., 2020 (372) ELT 867 (T-Kol) (x) Bombay Minerals Limited Vs. Commissioner of C.Ex. ST, 2019 (29) GSTL 361 (T) (xi) Commissioner of Central Excise Vs. IVP Ltd., 2017 (349) ELT 18 (Bom). (d) The appellant exercised for the first time its option in July, 2012 to effect reversal of cenvat credit in respect of duty/tax paid in or in relation to the manufacture of exempted DI Pipes. Thereafter, there has been no withdrawal of such option exercised either in the financial year 2012-13 or in the subsequent years. Thus, there is no violation of the provisions of Explanation I to Rule 6(3) of the Cenvat Credit Rules. In support, the appellant relied upon the decision of this Bench, in the case of Tata Steel Limited Vs. CCEX S.Tax, Jamshedpur (Final Order No. 75367/2020 dated 28.07.2020, passed in Excise Appeal No. 1 of 2011). In addition, the appellant relied upon the following case laws: (i) Mercedes Benz India (P) Ltd. Vs. Commissioner of C. Ex., 2015 (40) STR 381 (T) (ii) Aster Private Limited Vs. Commissioner of Customs C.Ex., 2016 (43) STR 411 (T) (iii) Alstom T D India Ltd. Vs. Commissioner of GST C.Ex., 2019 (370) ELT 625 (T). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the appellant to maintain separate accountal of input and input services used in or in relation to manufacture of exempted and dutiable final products prior to manufacture of the final products or reversal of the cenvat credit of the duty and tax involved in respect of exempted inputs and input services on proportionate basis after manufacture of the final products also satisfies the requirement of Rule 6(2) of the Cenvat Credit Rules? (ii) Whether, in the facts and circumstances of the instant case, the appellant is required to make payment of an amount equal to 6% of the value of the exempted goods and 7% of the value of the exempted services in terms of Rule 6(3)(i) of the Cenvat Credit Rules? (iii) Whether the appellant had altered the option exercised under Rule 6(3) of the Cenvat Credit Rules in mid 2012-13 and whether the same was not permissible as per Explanation I of Rule 6(3)? (iv) Whether the demand confirmed is barred by limitation? (v) Whether in the facts and circumstances of the case penalty equivalent is imposable upon the appellant under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Act? 8. Re: Issue No. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice that the appellant had reversed on proportionate basis the duty/tax paid on inputs and input services which were used, to the extent they related to exempted final products. There is no denial of this fact although issues have been raised regarding alleged discrepancies in the quantum of the reversals made, which we find had been duly attended to by the appellant by way of reversal with interest. It is also acknowledged in the impugned order that in all such cases of reversal, wherever required, the same has been effected along with payment of interest. 8.4 It is now a settled proposition that reversal of cenvat credit even after manufacture of the goods and/or clearance thereof amounts to not taking of the credit on the exempted goods and that in case of common inputs and input services used in or in relation to the manufacture of dutiable and exempted final products, credit proportionate to use of inputs and input services in exempted products, if reversed, the assessee is not required to make payment of an amount in terms of Rule 6(3)(i) of the Cenvat Credit Rules. 8.4.1 In the case of Commissioner of Central GST CX. Vs. Himmat Glazed Tiles, 2018 (15) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse proportionate cenvat credit. The option of paying an amount equal to 10% sale value of exempted goods, therefore, could not have been enforced on the assessee. That is how consistently even the Tribunals and the High Courts namely, the High Court of Karnataka at Bangalore, the High Court of Judicature at Madras and the High Court of Gujarat at Ahmedabad, have all understand and interpreted this provision. In such circumstances and even while these matters were brought to our notice, a Division Bench in the case of Central Excise Appeal No. 138 of 2005, decided on 17th October, 2016 [2017 (349) ELT 33 (Bom)] took up the same issue and held that these substantial questions of law would not survive. They would not have to be answered against the Revenue and in favour of the assessee. That is how they stand answered even in this matter. The Revenue s appeal is accordingly dismissed. 8.4.3 Coordinate Benches of the Tribunal have also held so. In the case of Commissioner of C.Ex. S.T. Vs. Secure Meters Ltd., 2017 (354) ELT 146 (T), in a similar case as in the instant case, has observed and held as under: 2. After hearing both sides we find that the respondents were enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, Revenue s appeal is rejected. Appeal against this decision preferred by the Revenue was rejected by the Hon‟ble Rajasthan High Court Union of India Vs. Secure Meters Ltd., 2017 (354) ELT A32 (Raj). 8.4.4 To same effect are the decisions of the Tribunal in Cranes Structural Engineers Vs. Commr. of C.Ex., 2017 (347) ELT 112 (T) and Bombay Minerals Ltd. Vs. Commr. of CE ST, 2019 (29) GSTL 361 (T). 8.4.5 In this respect it is also relevant to refer to the decision of the Hon‟ble Supreme Court in Commissioner of Central Excise Customs Vs. Precot Meridian Ltd., 2015 (325) ELT 234 (SC). In this case, dealing with an issue of exemption under a notification subject to non-availment of Modvat Credit, reversal of credit after availment on inputs and contention of Revenue that subsequent reversal did not satisfy the requirement of the exemption notification, the Hon‟ble Supreme Court observed as follows: 3. We note that five-Member Bench of the Tribunal in the case of Franco Italian Co. Pvt. Ltd. Vs. commissioner [2000 (120) ELT 792 (T-LB)] had taken the view that even if the MODVAT credit was utilised but, thereafter, refunded, it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue is also settled by the decision of this Bench in the case of Tata Steel Ltd. Vs. CCEx. ST, Jamshedpur, being Final Order No. 75367/2020 dated July 28, 2020, passed in Excise Appeal No. 1 of 2011. Relying upon the decisions of Coordinate Benches of the Tribunal in Mercedes Benz India (P) Ltd. Vs. Commissioner of C. Ex., 2015 (40) STR 381 (T) and Aster Private Limited Vs. Commissioner of Customs C.Ex., 2016 (43) STR 411 (T) it has been held as follows: 14. Both the above decisions are applicable on all fours to the instant case. There is no requirement under Rule 6(3)(i) and Rule 6(3A) of the Cenvat Credit Rules that the option had to be exercised on the first day of the financial year or the first month thereof. On the contrary, the said provisions clearly indicate that such option could be exercised at any point of time during a financial year by a manufacturer. The only restriction under Explanation-I of Rule 6(3) is that once such option is exercised, the same has to be continued with during the remaining part of the financial year. In this respect reference may also be made to the Larger Bench decision of the Tribunal in Ankit Packaging Ltd. Vs. CCE (supra). This c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Hence, following the principle laid down in the abovestated orders of the Tribunal it is conclusive that there has been due compliance by the appellant of the requirements under rule 6(3) and (3A), including the procedure laid down therein and the appellant has legally and validly availed the option in terms of Rule 6(3)(ii). The Commissioner has therefore erred in holding that the appellant had not fulfilled the conditions of procedure laid down in Rule 6(3) and Rule 6(3A) of the Cenvat Credit Rules and that the appellant was not entitled to avail option under Rule 6(3)(ii) of the Cenvat Credit Rules. 9.3 The materials on record clearly establishes that in this case the appellant had not exercised at any point of time during the period 2012-13 the option in terms of Rule 6(3)(i) of the Cenvat Credit Rules prior to July, 2020. No document to the contrary has been disclosed either in the show cause notice SCN or in the impugned order. In the impugned order it has been acknowledged by the Commissioner also that Explanation I to Rule 6(3) of the Cenvat Credit Rules does not bar exercising option in the middle of a financial year. However, according to him such optio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-maintenance of separate accounts of inputs/input services used in manufacture of exempted DI Pipes; (b) In response, the appellant paid an amount of ₹ 2,96,31,387/-, with interest amounting to ₹ 8,72,535/-, being equivalent to 5%/6% of the value of the exempted DI Pipes removed by the appellant without payment of duty during the period April 2011 to June 2012; (c) Through its ER-1 for July 2012, the appellant declared to the jurisdictional Range Officer of having started maintaining separate accounts of inputs used in manufacture of exempted DI Pipes by way of proportionate reversal post-manufacture of the goods; (d) the fact of availment of proportionate credit only in respect of inputs/input services used in manufacture of dutiable goods were reflected in the appellant‟s ER-1 for all months starting from July 2012; (e) Appellant‟s maintenance of separate accounts of inputs/input services used in manufacture of exempted DI Pipes, was confirmed during the subsequent audits conducted during the financial years 2012-13 to 2014-15 under EA 2000/CERA. 10.2. As such at all material point of time the Department was fully aware ..... X X X X Extracts X X X X X X X X Extracts X X X X
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