TMI Blog2021 (10) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... s of cenvat credit availed even in respect of common input services used for the manufacture of dutiable as well as exempted goods in their records and also filed ER-1 Return wherein the availment of cenvat credit was disclosed, no suppression of fact or willful misstatement, fraud or collusion or contravention of provision to evade payment of duty can be attributed to the appellant. Therefore, the demand of extended period is not sustainable also on the ground of limitation. The demand of an amount equal to 10%/5% of exempted value is not sustainable. Interest - penalty - HELD THAT:- The appellant has reversed the credit amount of ₹ 21,95,293/- along with interest which is maintained and remaining demand and interest there on, and entire penalty are set aside. Appeal allowed. - Excise Appeal No.10524 of 2015 - Final Order No. A/12456/2021 - Dated:- 25-10-2021 - HON BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) AND HON BLE MR. RAJU, MEMBER (TECHNICAL) For the Appellant : Shri Jigar Shah, Advocate For the Respondent : Shri Ghanshyam Soni, Joint Commissioner(AR) ORDER RAMESH NAIR The brief facts of the case are that the appellants are engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 (15) GSTL 486 (Guj.) Welspun Corp. Ltd 2019 (368) ELT 179 (Tri. Ahmd) BHEL- GE Gas Turbine Services 2021 (44) GSTL 399 (Tri.Hyd) Bombay Minerals Ltd 2019 (29) GSTL 361 (Tri.- Ahmd) Mercedes Benz India (P) Ltd 2015 (40) STR 381 (Tri.Mum) He submits that in the above judgments the very same issue has been decided by the Hon ble Gujarat High Court and this Tribunal. 2.1 Without prejudice, he further submits that Section 73 of Finance Act,2010 retrospectively amended the Rule 6 of Cenvat Credit Rules, 2004 whereby it allows the assessee to proportionately reverse the credit taken on the common inputs/ input services to the extent attributable to the manufacture of exempted final product wherein the dispute in this regard is pending. It requires the assessee to pay the credit amount along with interest and make an application before jurisdictional Commissioner along with documentary evidence and CA certifying the amount of credit attributable to the manufacture of exempted goods . He submits that in the present case the appellant have reversed the proportionate credit attributable to manufacture of exempted goods along with interest within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rates the finding of the impugned order. He placed reliance on the following judgments: Nicholas Piramal Ltd- 2018 (244) ELT 321 (Bom) Unimed Technologies Ltd- 2018 (17) GSTL 181(Guj.) Chemito Technologies P Ltd- 2017 TIOL-1161-CESTAT-Mum Prosafe International Ltd 2020-TIOL- 835- CESTAT-DEL Vasantdada SSK Ltd 2008-TIOL-1515-CESTAT-MUM Chemfab Alkalies Ltd- 2010 (251) ELT 264 ( Tri.Chennai) CCE, Coimbatore vs. CESTAT, Chennai- 2013 (294) ELT 372 (Mad) Dolphin Lab Ltd- 2014- TIOL- 1446-CESTAT-AHM Salem Co-operative Sugar Mills Ltd- 2016 (339) ELT 572 (Mad) Ellenbarie Industrial Gases Ltd- 2009 (240) ELT 371 (Tri.Kol) Castleton Tea Co P Ltd 2016 TIOL- 1460-CESTAT-Kol 4. We have carefully considered the submission made by both the sides and perused the records. We find that though the appellant have admittedly used common input services in the manufacture and clearance of dutiable as well as the exempted final product but they have reversed the proportionate credit in respect of common input services attributed to the exempted final product. The department has invoked Rule 6 (3)(i) of Cenvat Credit Rules,2004 whereby demand of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 1. - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of Rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2. - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for - (a) the receipt, consumption and inventory of inputs used (i) in or in relation to the manufacture of exempted goods; (ii) in or in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Ld. Adjudicating Authority demanded 5% of the total sale of the trading turnover of goods on the ground that option provided under Rule 6(3)(i) is applicable on the ground that claim of the appellant on the option provided under Rule 6(3)(ii) is not available for the reason that appellant has not complied with condition provided under sub Rule (3A) of Rule 6 which provides that manufacturers of the goods shall follow certain procedure and conditions as provided under sub-rule (3A)(a)(i) to (iv) inasmuch as the appellant have not given said information in writing to the Jurisdictional Superintendent of Central Excise. Secondly the appellant, as provided under Claus (b) of sub-rule (3A) have not paid the amount of Cenvat on monthly basis and paid after almost 11 months. 5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided :- (i) Payment of 5% on value of exempted services. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should pay the said amount, which has been complied by the appellant. 5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the compliance as provided under Clause (a) of sub-rule (3A) of Rule 6 the appellant while exercising this option is required to intimate in writing to the Jurisdictional Superintendent, Central Excise, the following particulars namely : (i) Name, address and registration No. of the manufacturer of goods or provider of output service; (ii) Date from which the option under this clause is exercised or proposed to be exercised; (iii) Description of dutiable goods or taxable services; (iv) Description of exempted goods or exempted services; (v) Cenvat credit of inputs and input services lying in balance as on the date of exercising the option under this condition. As per the submission of the appellant and perusal of their letter along with enclosed details, it is found that more or less all these particulars were intimated to the Jurisdictional Superintendent. The appellant has been filing their returns regularly on monthly basis to the department. On perusal of the copies o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub-rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. 5.5 As discussed above and in the facts of the case that actual Cenvat credit attributed to the exempted services used towards sale of the bought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs attributable to manufacture of exempted final products. Rule 6 of Cenvat Credit Rules, 2004? 2. Briefly stated the facts are that the assessee is a manufacturer of ceramic products. These are by-products and is called body clay powder which envisages nil rate of duty. The assessee did not maintain separate accounts and initially 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 v. Ashima Dyecot Ltd. reported in 2008 (232) E.L.T. 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. Ashima Dyecot 2008 (232) ELT 580 (Guj.) affirmed by Hon ble Supreme Court 2009 (240) ELT A41 (SC) 5. We have considered the submissions made by the learned Standing Counsel appearing for the Department and we have also gone thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l products which are exempt from duty. Based on this, the Court held that the manufacturer may take credit of duty paid on all the inputs used in the manufacture of final products on which duty will have to be paid and in view of this clarification by the Department, the Court saw no reason that why the assessee should not make a debit entry in the credit account before removal of the exempted final product and hence, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. The Court, therefore, took the view that the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken the credit of the duty paid in the inputs used in manufacture of these goods. The ratio laid down in this decision is squarely applicable to the facts of the present case and maintenance of separate books of accounts at the initial stage cannot be considered to be a condition precedent for the purpose of claiming the benefit of exemption to the respondent-assessee. 7. Even Rule 6(3) of the Cenvat Credit Rules, 2004 says that notwithstanding anything contained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city 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. For ease of reference, we reproduce below the Rule 6(3) of Cenvat Credit Rules, 2004 : (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or (ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as well as when the same are commonly used for dutiable as well as exempted products/services. Though detailed procedure starting with an option to be exercised by manufacturer has been prescribed, in the present case, the appellant has not followed the same. However, it is on record that they have already reversed an amount claimed to be proportionate. It is also pertinent to record that this has been done by the appellant even before the issue of the show cause notice in this case. We are of the considered view that the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given any finding as to whether the reversal already made satisfies the test of proportionate reversal in terms of quantum of reversal. Hence, we are of the considered opinion that the matter is to be remanded to the original adjudicating authority to verify whether the amount of Cenvat credit already reversed along with interest satisfies the requirement of proportionate reversal. We also make it clear that there is no justification for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al products on the basis of appellant‟s records after affording opportunity to the appellant to explain their case before deciding the issue of quantum of Cenvat credit in remand proceedings. The Hon‟ble Supreme Court in the case of Bombay Dyeing Mfg. Co. Ltd. - 2007 (215) E.L.T. 3 held in para 8 that : 8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002- C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming Cenvat credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Sub-rule (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 the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in the judgments cited supra. It has been held in the judgment cited supra that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Rule 57CC of the Rules as it stood at the relevant time made provision for Adjustment of credit if final products are exempted. Under the said rule where a manufacturer was engaged in the manufacture of any final product which was chargeable to duty as well as any other final product which was exempt from the whole of the duty of excise leviable thereon or was chargeable to nil rate of duty and the manufacturer took credit of the specified duty on any input (other than inputs used as fuel) which was used or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (2) are complied with, pay an amount equal to eight per cent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t attributable to the inputs used in or in relation to the manufacture of the final products, which are exempted from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. (3) The Commissioner of Central Excise shall, on receipt of an application under sub-section (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the application and in case the amount so paid is found to be less than the amount payable, he shall call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard. (4) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 1st day of September, 1996 and ending with the 31st day of March, 2000, relating to the provisions as amended by subsection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided that the manufacturer shall pay an interest at the rate of twentyfour per cent, per annum from the date of clearance of goods till the date of payment of the said amount. . 1st day of September, 1996 to 28th day of February, 1997 (both days inclusive). 2. Rule 57CCC of the Central Excise Rules, 1944 as inserted by section 69 of the Finance Act, 2010. In the Central Excise Rules, 1944, for rule 57CCC, the following rule shall be substituted, namely :- 57CCC. Reversal of Actual Credit .-Where a dispute relating to adjustment of credit on inputs used in or in relation to exempted final products relating to the period beginning on the 1st day of March, 1997 and ending with the 31st day of March, 2000 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then, Notwithstanding anything contained in sub-rules (1) and (2) of rule 57C and subrule (1) and sub-rule (9) of rule 57CC, a manufacturer availing credit of specified duty in respect of any inputs, other than inputs used as fuel, and manufacturing final products which are chargeable to duty an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the relevant time, in the light of the provisions of Rule 57CC of the Rules, the entitlement of the petitioner to reverse the credit to the extent of common inputs used in the manufacture of goods which carried nil rate of duty was in doubt. However, subsequently, by the introduction of Rule 57CCC of the Central Excise Rules, the situation has been taken care of inasmuch as the said rule which has been given retrospective effect from 1996 provides for reversal of the actual credit by the manufacturer availing credit of specified duty in respect of inputs used for manufacture of final products which are chargeable to duty as also other final product which are not chargeable to duty or chargeable to Nil rate of duty, by payment of amount equivalent to the credit attributable to input used in or in relation to the manufacture of such final products which are not chargeable to duty or chargeable to nil rate of duty before or after the clearance of such goods. Sub-section (2) of Section 69 of the Finance Act, 2010 provides that where a person opts to pay the amount in accordance with the provisions of Central Excise Rules, 1944 as amended by sub-section (1), he is required to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent with no order as to costs. BHEL- Ge Gas Turbine Services Pvt Ltd- 2021 (44) GSTL 399(Tri.Hyd) 6. The facts involved in this case are not in dispute that the appellant had availed common input services, which were used for providing the taxable output services as well as the trading activities and that the appellant had reversed the quantum of Cenvat Credit attributable to such trading activities. We have noticed from the impugned order at paragraph 9.7 that the appellant had deposited the service tax amount in respect of the cenvat credit taken for providing the trading activities. Since, the Cenvat Credit amount towrds trading of goods was paid by the appellant, it has to be construed that no cenvat credit was at all taken by the appellant in respect of the common input services, In this context, the Hon‟ble Supreme Court in the case of Chandrapur Magnet Wires(P) Ltd vs. Collector of Central Excise, Nagpur- 2002-TIOL- 41-SC-CX= 1996(81)ELT 3(SC) have ruled that on reversal of credit, the asseessee cannot be said to have taken credit of duty on the inputs utilized in the manufacture of exempted final products. However, the appellant is liable to compensate the Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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