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TMI Blog2024 (4) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... having many opportunities, which finds mention in the findings of the adjudicating authority. However, the issue whether the figures taken by the Department standalone Balance-sheet pertaining to Godawari Power and Ispat Ltd, do not require verification at the original stage. In view of the emphatic submissions made, this matter requires reconsideration at the original stage and needs to be remanded. Whether the demand of the amount of Rs 83,62,788/- on account of CENVAT Credit availed on common input services used for exempted services alleged to be Trading of goods, but claimed to have cleared inputs as such is correct? - HELD THAT:- The profit earned out of such clearances, alleged to be trading, and common use of the input services has not been controverted in any manner by the ld. Counsel of the appellant. Therefore, these are triggers to decide this issue as to whether the clearances by earn of substantial profit would remain within the ambit of inputs cleared as such under Rule 3(5) or would it be tantamount to the trading of the goods , besides use of common input services. The appellant has reversed the Cenvat Credit on these goods which they had traded. In view of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rized Representative for the Respondent ORDER M/s Godawari Power Ispat Limited (here-in-after referred to as the Appellant ), is filing the instant appeal against Order-in-Appeal No. BHO- EXCUS-002-APP-322-18-19 dated 29.08.2018 (hereinafter referred to as OIA dated 29.08.2018 ) passed by the ld. Commissioner (Appeals) while deciding Appeal filed against Order in Original No. 60/ADC/ CEX/RPR/2018 dated 29.03.2018 passed by Ld. Additional Commissioner while adjudicating SCN F.No. V (Ch.72) 15-196/Commr/RPR/2015/Adj/6908 dated 22.11.2016 (hereinafter referred to as SCN dated 22.11.2016 ). 2. The brief facts of the case are that the Appellant is public company listed on BSE and engaged in the business of manufacture of iron steel products generation of power at its integrated manufacturing facility registered under erstwhile central excise laws vide registration number AAACI7189KXM001. The Appellant had a separate division as a separate manufacturing facility namely R.R. Ispat registered separately under erstwhile central excise laws vide registration number AAABCR6219CXM001. 2.1. Similarly, the Appellant had another unit, which was taken over from M/s Hira Industries Limited having i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records for the period 2013-14 2014-15. During the said audit the above calculations have been verified and no discrepancies have been found. 2.8. Appellant has been regularly reflecting reversal of credit on account of sale of power in its statutory annual returns i.e. ER-4. 2.9. Appellant had also filed its option for reversal of credit on account of sale of electricity in terms of Rule 6(3A). As seen no objections regarding such reversals have been made by the revenue in the past. Even on filing of the option under Rule 6(3A) intimating the formula to be adopted for reversal no objection was raised. 2.10 On scrutiny of balance sheet, the revenue noticed that Appellant has sold electricity to electricity board and has engaged in trading of goods like manganese ore, coal imported scrap which are raw material for the Appellant at the disputed registered location and also at the other division i.e. RR Ispat. Based on the above, revenue issued instant demand notice in two parts i.e. demand of credit pertaining to sale of electricity and demand of credit pertaining to trading of goods. 2.11 Demand of credit pertaining to sale of electricity, it was the case of the revenue regarding s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Excise laws as evidenced above. This is for the reason that balance sheet of the Appellant is not made unit wise but for the entire company as a whole as per the Statutory guidelines under the Companies Act. 3.3 He further submits that even the turnover as mentioned in ER-4 return is concerned, it includes value of electricity for Appellant unit along with sale value of items on which no reversal under Rule 6 is required as the same are not manufactured goods like iron ore fines and carbon credits. The revenue authorities failed to examine the data of ER-4 returns of the Appellant despite that the entire case has been made out based on the verification of ER-4 returns. 3.4 However, while considering the value of credit in computation the value of credit has been taken to be entire credit availed by the Appellant including credits pertaining exclusively to dutiable activities. The Commissioner (Appeals) further goes on to hold that adoption of entire value of credit availed is correct despite admission in the demand notice itself that demand has to be confined to common services. 3.5 He further submits that the main business of Appellant is of manufacturing dutiable iron and stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous and represents inflated amounts of reversals demanded from the appellant by inclusion of sale of electricity and credit amounts of other registered units. 3.9 Learned Counsel further submits that in view of the above, no demand survives on account of sale of electricity outside by Appellant unit as by applying appropriate formula under Rule 6(3A), the amount of reversal required is Rs. 41,15,436/- which is less than the amount already reversed by the Appellant i.e. Rs. 67,28,438/-. This part of the OIA dated 29.08.2018 is liable to be set aside on this ground itself. 3.10 He further submits that it is an admitted position in the entire proceedings that demand is to be confined only to the extent of use of common input services in generation of electricity sold outside the disputed registered premises. There can be no demand on credit pertaining to services relatable exclusively to dutiable activity. Rule 6(1) to the CENVAT Credit Rules shall apply only on credits which have nexus to exempted activity. 3.11 He further submits that during the period Appellant has already reversed CENVAT credit on common input services based on directions of the revenue during various annua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been used exclusively in manufacturing of dutiable goods or provision of taxable services. Further, if no separate books of accounts is being maintained then the manufacturer or the service provider has following options:- a. Pay 6%/7% of the value of the exempted services under Rule 6(3)(i) of the Credit Rules or b. Pay/reverse the cenvat credit on common inputs/input services under Rule 6(3)(ii) of the Credit Rules following the procedures and formula given under Rule 6(3A). 3.16 He further submits that activity of Appellant is not covered under Rule 6 of the CENVAT Credit Rules and hence Appellant is not hit by the rigours of Rule 6. Consequently, neither any reversal nor any payment is required under Rule 6 of the CENVAT Credit Rules. 3.17 That it is an admitted position in instant proceedings that disputed clearances are that of coal, manganese ore imported scrap. It is also admitted at Paragraph 9 of the show cause notice dated 22.11.2016 that aforesaid goods have been purchased by Appellant for use in manufacture of dutiable goods. Thus, it is undisputed that all the disputed goods are inputs of the Appellant which stand established from relied upon documents and statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsal of CENVAT credit under Rule 3(5) of the CENVAT Credit Rules. 3.23 The transaction of Appellant of clearance of inputs/ capital goods as such stands covered under Rule 3(5) of the Credit Rules and appropriate credit stands reversed by the Appellant on removal of disputed goods. The same transaction cannot be covered separately under Rule 6 read with Rule 2(e) of the Credit Rules for reversal of credit on common input services. 3.24 He further submitted that the issue is settled in favour of the Appellant by the Tribunal in the case of CCE Vs UP Telelinks - 2015 (329) ELT 888 (Tri - Del) wherein it has been held that clearances of inputs as such will not qualify to be a trading activity. 3.25 It has been consistently held by the Courts that when Credit Rules did not separately define trading activity then also credit was not available in proportion to trading turnover as trading activity was outside the purview of Credit Rules. Such reversal was however, not under Rule 6 of the Credit Rules. Reliance is placed on the following decisions:- (i) Mercedese Benz India Pvt. Ltd. Vs CCE-2014 (36) STR 704 (Tri-Bom) (ii) Delcam Software India Pvt. Ltd Vs CCE-2016 (43) STR 103 Tri - Bom) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6%/7% under Rule 6 of Credit Rules does not arise. For this reason itself, this part of OIA dated 29.08.2018 is liable to be set aside with consequential relief to the appellant. 3.31 He also submitted that where assessee has acted under bonafide belief which was based on directions of the revenue authorities then no charge of suppression can be leveled against the assessee. In this regard, reliance is placed on the following decisions:- CCE Vs N.R. Agrawal Industries - 2014 (300) ELT 213 (Guj) CCE Vs Raptakos Brett Co. - 2006(194) ELT 101 (Tri - Mum) CCE Vs Orion Ferro Alloys Pvt. Ltd - 2010(259) ELT 84 (Tri - Del) CCE Vs Rajaram Maize Products - 2010 (258) ELT 539 (Tri - Del) Final Order No. A/52257-52258/2014 - EX[DB] dated 07.05.2014 Continental Foundation Joint Venture Vs CCE 2007 (216) ELT 177 (SC) 3.32 He further submitted that the aforesaid allegations regarding suppressions of information are factually incorrect and only forwards the case of Appellant on limitation. That Rule 6 applies only on account of common inputs input services used in manufacture of dutiable exempted goods. That since Appellant has been periodically reversing credit under Rule 6 and the same stands v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing judgments: CCE v. Sikar Ex-Serviceman Welfare Coop. Society Ltd. 2006 (4) S.T.R. 213 (Tri. Del.) Haldia Petrochemicals Ltd. v. CCE 2006 (197) E.L.T. 97 (Tri. - Del.) Siyaram Silk Mills Ltd. v. CCE 2006 (195) E.L.T. 284 (Tri. - Mumbai) Fibre Foils Ltd. v. CCE 2005 (190) E.L.T. 352 (Tri. - Mumbai) ITEL Industries Pvt. Ltd. v. CCE 2004 (163) E.L.T. 219 (Tri. - Bang.) 3.36 He further submits that credit was availed on bonafide belief of admissibility of such credit as established in preceding paragraphs. It is settled law where assessee has acted under bonafide belief, penalty is not imposable. Reliance is placed on following decisions:- CCE Vs N.R. Agrawal Industries-2014 (300) ELT 213 (Guj) CCE Vs Raptakos Brett Co. - 2006(194) ELT 101 (Tri - Mum) CCE Vs Orion Ferro Alloys Pvt. Ltd- 2010(259) ELT 84 (Tri - Del) CCE Vs Rajaram Maize Products-2010 (258) ELT 539 (Tri - Del) Final Order No. A/52257-52258/2014-EX[DB] dated 07.05.2014 Continental Foundation Joint Venture Vs CCE-2007 (216) ELT 177 (SC). 3.37 The present proceedings also seek to recover interest under Rule 14 of the Rules read with Section 11AA of the Central Excise Act, 1944 as it is alleged that the Appellant has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as per formula, appellant is liable to pay 6% of the value of traded goods. Further, the appellant has not proved and submitted that they have availed CENVAT credit on all traded goods. Department s submission : Burden of proof regarding admissibility and utilization of CENVAT credit on input service is upon the appellant in terms of Rule 9 (6) of the CCR. Under Self-assessment, it is duty of the assessee to correctly determine their liability and discharge with true disclosure. No declaration for clearance of electricity and trading in ER-1 return. No intimation was filed with Supdt about credit reversal in terms of clause (g) of Rule 6 (3) of CCR for correct determination of credit reversal as per formula. In terms of option exercised by the appellant, it was a bonafide belief that unit is not availing credit on common input services. Their declaration was that No input service is specifically used for exempted trading activity . They suppressed that information that there is common input service used for trading activity. Once something is declared, it is presumed that other thing are not in existence. It was a bonafide belief that unit is not availing credit on common input s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y their other units, namely R.R. Ispat Unit and Hira Industries. For this purpose, the ld. Counsel of the Appellant has submitted additional submissions. For the sake of brevity, the data as submitted by the learned Counsel is reproduced hereinafter; GODAWARI POWER AND ISPAT LIMITED, RAIPUR DETAILS OF POWER SOLD FOR THE PERIOD 2010-11 TO 2014-2015 Financial Year Value of Exempted Goods (M) as taken by the department Value of power sold from the Noticee's unit at Siltara, Raipur (Rs) Value of power sold from Wind Mill registered in the name of R.R. Ispat (Rs.) Value of power sold from Wind Mill registered in the name of Hira Industries (Rs.) Total 2010-11 42,10,27,665.00 39,99,72,203.00 1,76,36,429.00 34,19,033.00 42,10,27,665.00 2011-12 22,72,79,823.00 21,00,90,060.00 1,46,63,503.00 25,26,260.00 22,72,79,823.00 2012-13 20,55,50,869.00 18,31,94,088.00 1,87,66,092.00 35,90.689.00 20,55,50,869.00 2013-14 10,76,40,860.00 9,42,66,344.00 1,17,00,638,00 16,73,878.00 10,76,40,860.00 2014-15 5,40,64,695.00 4,21,51,472.00 1,02,14,068.00 16,99,155.00 5,40,64,695.00 Total 1,01,55,63,912/- 92,96,74,167.00 7,29,80,730.00 1,29,09,015.00 1,01,55,63,912/- 7.1. The ld. Counsel of the appellant h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell by the jurisdictional Range Superintendent to establish their claim that the demand in the instant SCN has been quantified taking the consolidated sale figure from the balance sheet which includes the figures in respect of RR Ispat Division Wind Mill Division In view of this position the Notice s plea on this count is not justified and hence not acceptable. I hold that the demand of Rs.97,01,260/ - quantified in terms of Rule 6(3)(ii) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 and as proposed in the SCN is sustainable against the Notice. However, this issue whether the figures taken by the Department standalone Balance-sheet pertaining to Godawari Power and Ispat Ltd, ot not requires verification at the original stage. In view of the emphatic submissions made by the ld counsel before us, we are of the opinion that this matter requires reconsideration at the original stage and needs to be remanded. Trading of the goods Vs. Input cleared as such: (RE: Q.II) 9. The disputed issue is that the subject goods cleared by the appellant tantamount to the trading of goods, as alleged or whether clearances of inputs were as such as claimed by appellant. If these clearances are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . If these clearances are considered as trading which is an exempted service, the appellant firstly not allowed to take credit on these inputs and simultaneously was required to reverse/pay amount of the CENVAT Credit on account of used of common input services. 12. Learned Authorised Representative further submitted that the appellant has earned a substantial profit out of such trading which he arrived @ 17% in the financial year 2014-15 and similarly in other financial years as well. For this reason itself, he emphasised that such clearances cannot be considered under Rule 3(5) which is not intended to allow the trading by earn of the profit in its guise. He further explained that this would be further a wind-fall gain as appellant have to consider enhanced value of such traded goods being exempted services for reversal of the credit by use of the formula prescribed under Rule 6(3A), which they succeeded to avoid. He has, therefore, submitted that undertaking trading under Rule 3(5) would be against the intent of the legislature for making such provisions as a facility in exigency and not to allow trading in its guise. He further added that the common use of input services for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to theduty leviable on transaction value.] [(5B) If the value of any, (i) input, or (ii) capital goods before being put to use, 25[on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods: Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of 32 [output services], the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these rules.] (5C).- Where on any goods manufactured or produced by an assessee, the payment of duty is ordered to be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputs used in the manufacture or production of said goods and the CENVAT credit ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessed are sent to a job worker for further processing, testing, repair, reconditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory. The same expression is also used in Rule 3(4)(c) of the 2004 Rules and the rule reads as under :- When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final products shall, pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7.1. 2. The expression as such has to be interpre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original form and without any addition, alteration or modification. The phrase as such is to be interpreted to mean what is being indicated or suggested i.e. anything per se with respect to its inherent nature. Thus for anything to be as such , nothing should have changed whether it be appearance. Composition quantity or even the value assigned to it at the initial state. Thus, any change from the original form, whether physical or monetary, as is, in the present case is earning of profit, will consequently keep such clearances out of the purview of the Rule 3 (5), whereas same is not the case for capital goods which were allowed to be cleared after use in the manner prescribed. 15. While contending the issue, ld. counsel of the appellant has relied upon two case laws as mentioned in para 10 above. The case of Suyash Auto Pres Components and Assemblies Pvt. Ltd. is distinguishable of three aspects: Mumbai Tribunal in 2018 has not given any finding on the expression as such and the decision of the Larger Bench of the Tribunal in the case of Modernova Plastyles Pvt. Ltd was not before the Mumbai Tribunal; second aspect is of the use of common input services; and third aspect is the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information statement in form ER-4 filed by them revealed the separation of the above facts by them of deliberately evading the payment of said amount on sale be exempted goods viz electricity and providing exempted services viz trading of goods, which is recoverable from them under Rule 14 of the Rules read with Section 11A of the Act, along with interest at the appropriate rate under Rule 14 of the Rules read with Section 11 AA of the Central Excise Act. It also appears that the Noticee has also rendered themselves liable for penal action under Rule 15 (2) of the Rules read with Section 11 AC (1) of the Central Excise Act 1944. 18. The ld. counsel of the appellant has submitted that they were subjected to periodic audits and also submitted periodic returns with full disclosure; that they were successful in earlier proceedings before the Tribunal when the Hon ble Tribunal vide its order dated 14.1.2016 held that the respondent have not taken any undue benefit and they have reversed the credit attributable to the electricity cleared outside. There is no cause for initiating action for recovery of 8% or 10% of the value of such electricity ; that referred to an intimation dated 1.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:- (i) details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); 19.3 The Learned Authorised Representative led us to the content of (paragraph 2 of the show cause notice) Central Excise Audit of the books and accounts of the Noticee was conducted by the Audit Officers of Central Excise, Raipur. The audit team, on the basis of records, financial details of manufacturing activities, including form ER-4 for the financial year 2010-11, submitted by the Noticee, pointed out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under consideration that the assessee himself opted to reverse the Credit under Rule 6(3A) instead of following same in the way held by the Tribunal. 22. Having opted for reversal under Rule 6(3A), it was bonafide belief of the department that the assessee ought to be reversing the CENVAT Credit for the exempted goods and exempted services in the manner prescribed under Rule 6(3A). 23. Even the relied upon judgments to favour them in the case of Savarna Stocks Pvt. Ltd. Vs. Commissioner Chennai [2021 (52) G.S.T.L.408 (Tri-Chennai)] cannot rescue them in view of the option exercised to follow Rule 6(3A) which was not the case of Chennai Tribunal. Similarly, the case of Reliance Industry Ltd. [2019 (28) GSTL 96 (Tri-Ahmd.)] is not applicable as the facts of the case is different from present case in as much as the appellant have not pleaded grounds which were subject matter in the Reliance Industries Ltd. 24. The admitted facts in the case are that the declaration under Rule 6(3A) filed by the assessee on 1.10.2016 was found to have not mentioned the common input services which was used for both exempted goods and services. A plain reading of this declaration would not indicate any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decisions wherein various courts and Tribunal has held in invocation of extended period of limitation in similar circumstances. In case of Neminath Fabrics [2010 (256) E.L.T. 369 (Guj.)], Hon ble Gujarat High Court has held as follows: 16. The termini from which the period of one year or five years has to be computed is the relevant date which has been defined in sub-section (3)(ii) of Section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub-section (1) of Section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal. 17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires knowledge of the irregularities the suppression would not be obliterated. 29. In case of Usha Rectifier [2011 (263) E.L.T. 655 (S.C.)], Hon ble Supreme Court observed as follows: 12. Submission was also made regarding use of the extended period limitation contending inter alia that such extended period of limitation could not have been used by the respondent. The aforesaid contention is also found to be without any merit as the appellant has not obtained L-4 licence nor they had disclosed the fact of manufacturing of the aforesaid goods to the department. The aforesaid knowledge of manufacture came to be acquired by the department only subsequently and in view of non-disclosure of such information by the appellant and suppression of relevant facts, the extended period of limitation was rightly invoked by the department. 30. In the case of ICICI Econet Internet Technology Fund [2021 (51) G.S.T.L. 36 (Tri. - Bang.)], Bangalore bench has observed as follows: 46. We find that the appellants have argued that this is a matter of interpretation and all the information being in public domain, suppression of any material fact with intent to evade payment of duty cannot be alleged. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amount, payable by them as per admitted position under Rule 6 (3A) on the exempted goods cleared by them by the due date and hence demand of interest on the delayed payment is justified. Hon ble Bombay High court has in case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] held that there is no discretion not to charge the interest u/s. 11AB at all and language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time. 34. In view of above discussions, we hold as follows: (I) Computation of demand of the amount of Rs.97,01,260/- on account of CENVAT Credit availed on common input services used for electricity: The extended period is upheld while the issue is being remanded to the original authority to verify the figures, giving the opportunity to the appellant to place all necessary documentation in support of their contention that the figures are inclusive of their 2 other units. (II) The demand of the amount of Rs 83,62,788/- on account of CENVAT Credit availed on common input services used for exempted services a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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