9911796707
TMI Blog2024 (5) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT Credit Rules, 2004." 2.1 Appellant is engaged in the manufacture and clearance of dutiable articles of glass i.e Glass Table ware/Kitchen ware CSH- 70133900,Glass Jars CSH- 70109000 as well as exempted goods ( mouth-blown glass) i.e. glassware- CSH- 70133900, glass chimneys for lamps and lanterns- CSH 70200021 and Glass Bangles CSH-70181010 of the Central Excise Tariff Act,1985. 2.2 Acting on an intelligence that the party had suppressed the production and clearances of exempted goods and had been deliberately contravening the provisions of Rule 6 of the Cenvat Credit Rules, 2004 with intent to evade payment of the amount as prescribed under the Rules, a team of the Preventive Officers of the Central Excise Division, Agra, visited the factory premises of the party on 11.12.2009. 2.3 The party was paying the Central Excise duty on goods produced by the automatic process and was availing exemption from the payment of the excise duty on the glassware namely glass chimneys & glass ware and Bangles, which were being produced by mouth blown process in terms of General Exemption No.52-B, Sr. No.16 of Notification No.5/2006-CE, dated 01.03.2006, as amended time to time. The Glass B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacturers. Rule 6(2) of the Cenvat Credit Rules, 2004 prior to its amendment with effect from 01.04.2008, states that a manufacturer of dutiable as well exempted finished goods has to maintain separate record of receipt, consumption and inventory for input/ input services consumed. Similar provisions have been made in the amended provisions of Rule 6(2) and Rule (3) of the Cenvat Credit Rules, 2004 which has been amended w.e.f. 01.4.2008. 2.7 The departmental was of the view that as per provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, the Cenvat credit is not allowed on such quantity of material (input)/ input service which were used in exempted goods and as per sub-rule (2) of Rule 6 of Cenvat Credit Rules, 2004 the manufacturer or provider of the output services has to maintain the separate of inventory of the input and input services. The intention of rule is very clear which implied that no quantity of input/ raw material on which Cenvat credit was taken should be used in the manufacture of the exempted goods, but in the instant case the party failed to do so. 2.8 In the instant case the condition of maintenance of separate inventory supra of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of exempted finished goods. They were duly maintaining the separate records of the raw material used for dutiable and exempted goods. The said records are annexed as Annexure 5 in Volume II of the Paper book. * Rule 6 does not require a manufacturer to carry out the manufacturing process on entirely different machines, furnaces etc., had this been the case then the purpose of manufacturing both types of products in a single unit, as contained in Rule 6 would largely be frustrated when all the processes have to be carried out separately. * Demand is barred by limitation. Extended period of limitation as per Section 11 A has not been invoked in the present case while making this demand. 3.3 Arguing for the revenue learned authorized representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records findings as follows, for confirming this demand against the appellant. "To understand the issue in a more subtle matter, it is necessary to examine the provisions of Rule 6 with effect from 01.04.2004 i.e. the date of noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 total price of the exempted goods and the provider of output service shall pay an amount equal to six per cent, of total price 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 atributable 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 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. Explanation II. - For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted goods. Though from 01.01.2008 they have operated one furnace and maintaining records of exempted and dutiable goods separately. On going through the records resumed and defence submitted, I find that they failed to prove their claim, in as much as they have not submitted any evidence, documentary or otherwise to establish that separate goods were produced from the two furnaces. They accepted that during the course of manufacture, certain broken glass was generated, which was recycled within the factory itself, and such broken glass enjoyed duty exemption under /26 Notfn. No. 67/95 CE dated 16.3.1995 (as amended) whereas no record of broken glass or bhanger was maintained by them. I have also gone through the case records, wherein I observe that the inputs viz. Soda Ash and other chemicals used in both the categories of the final products were stored at the same place and no separate inventory of inputs in respect of dutiable and exempted goods was maintained. Moreover these inputs were fed into a single common furnace from which moltèn glass was taken out for manufacturing of dutiable and exempted goods. This fact has been admitted by the party with the exception t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008, substantial changes have been made in the provisions of Cenvat Credit Rules, 2004 and I have also gone through the amended provisions of the law, wherein a detail procedure has been laid down for calculation and reversal of amount on account of proportionate basis w.e.f. 01.04.2008. The procedure as per sub-rule 3(A) of Rule 6, is as under: "(3A) For determination and payment of amount payable under clause (i) of sub-rule (3), the manufacturer of goods or the provider of output serwice shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,- (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely.." On going through the amended provisions, I find that with the inserti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w also finds support from the various citations relied upon by the department while framing the allegations against the party. In the case of Commissioner of C. Ex. Thane-l V/s M/s Nicholas Piramal (India) Ltd. [2009(244) E.L.T.321(Bom.)], the Hon'ble High Court, Mumbai has held that:- ..... I further observe that the party has contested that there is no justification for demanding any amount on the value of exempted goods in excess of the Cenvat credit attributable to inputs used in or in relation to manufacture of dutiable/exempted goods. In this regard they submitted that an amount of Rs3,03,68,017/- has been demanded which is even higher to the total credit of Rs. 2,54,69,932/- taken by them during the relevant period The party has also contended that recovery under Rule 14 of The Cenvat Credit Rules, 2004 and the provisions of Sections 11A and 11AB of the Central Excise Act, 1944 does not apply in the present case as the show cause notice has no relevance to the recovery of CENVAT credit taken wrongly or utilized wrongly or been refunded erroneously to the assessee. find that the contention of the party is illogical in the light of provisions discussed in the preceding pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that they have availed cenvat credit in respect of common inputs used for manufacture of dutiable as also exempted final products. The appellant during the course of adjudication, took a categorical stand before the adjudicating authority that in respect of Cenvatable inputs they have maintained separate records, thus, the question of invocation of the provisions of Rule 6 (3) does not arise. 4. The said plea of the appellant stands rejected by the adjudicating authority on the ground that no such separate records were being maintained in respect of non cenvatable inputs as also on the ground that inputs were not being stored separately. The adjudicating authority also took an objection to the fact that the furnace used fr both type of the goods is the same. 5. After hearing both the sides, we find that the objection adopted by the adjudicating authority cannot be accepted inasmuch as the provisions of Rule 6 (1) of the Cenvat Credit Rules requires as assessee to maintain separate account only in respect of cenvatable inputs and there is no requirement for maintenance of such records in respect of non cenvatable inputs. Further, we also note that there is no requirement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8)ELT 179(Tri.) (ii) Star Agriwarehousing& Collateral Management Ltd. vs. CCE - 2021 (44) GSTL271 ((Tri.) (iii) Ahemdnagar District Central C-op Bank Ltd. vs. CST - 2018(364)ELT 1098 (Tri.) (iv) Reliance Life Insurance Co. Ltd. Vs. CST -2018(363)ELT 1050 (Tri.) 5. On the other hand, Shri Ganasyam Soni, Additional Commissioner (AR) reiterated the findings in the impugned order. 6. We have heard both the sides and perused the records. We noticed that in the present matter Ld. Commissioner confirmed the demand for the period April 2008 to June 2009 on the ground that the Appellant has availed the Service tax credit on Common input services used in the exempted products "Siapton 10L" without maintaining separate records in terms of Rule 6 of Cenvat Credit Rules, 2004. Ld. Commissioner held that this period is not covered under the retrospective amended vide Clause 73 of the Finance Act, 2010, thus the Appellant are not liable to pay 10% of the value of assessable value of exempted products. We find that that Rule 6 of the Cenvat Credit Rules, 2004 was amended beneficiating the assessee under the Finance Act, 2010 and that the new subrule (7) inserted under Rule 6 ibid enable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is required to pay 10%of the value of the goods cleared without payment of duty (exempted goods). From the facts it is undisputed that the appellant have been reversing Cenvat credit proportionate to the credit on input service used for exempted goods along with interest, therefore, first the credit though availed at the time of receipt of input service but after reversal thereof along with interest the position is as if credit was not availed. We are also of the view that Rule6 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. Moreover this issue has been consistently considered in various judgments wherein it was held that if the assessee reverse the Cenvat credit in respect of common input service used in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (supra) also held that reversal of Modvat Credit at the time of clearance of the goods amounts to non-availing of credit. All the judgments relied upon by the appellant also confirm the above position. The Hon'ble High Court of Karnataka in the case of Himalaya Drug Company held that the provisions of Rule 6(3)(i) of the Credit Rule, 2004 would not be attracted if reversal of credit is done in respect of inputs used in the manufacture of exempted final products. In view of these decisions, we are of the considered view that the reversal of credit by the appellant on the entire service tax taken along with interest thereon both in respect of dutiable goods as well as exempted goods amounts to non-availing of credit and, therefore, the provisions of Rule 6(3)(i) are not attracted and the confirmation of demand by the adjudicating authority directing the appellant to pay an amount at the rate of 5%/10% of the value of the exempted goods is not sustainable in law. Consequently, the imposition of penalties on the appellant and appellant firm and its manager are also not sustainable in law and accordingly, they are set aside. However, the appellant has initially availed credit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. '08 is, therefore, required to be verified on the basis of the formula provided under Rule 6(3A). For this purpose, we set aside the impugned order and remit the case to the adjudicating authority for carrying out the above verification. He shall pass fresh orders after extending a reasonable opportunity to the assessees of being heard in their defence. 5. The appeal is thus allowed by way of remand." * In the case of Star Agriwarehousing & Collateral Management (supra) it was held as under: "7. We have also heard Learned Departmental Representative who has generally supported the findings given in the order-in-original. 8. We have heard the rival contentions and are of the view that it is a matter of record that the appellant have been providing both taxable and exempted output services in respect of which they have been availing credit of common input services. It is also a matter of record that the appellant have fulfilled the requirement of Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 read with Rule 6(3A) and have been reversing the amount of common Cenvat credits, proportionate to value of exempted output services. In this regard we take note of the fact that appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t credit. This view is supported by various decisions of the Supreme Court/High Courts and Tribunal, some of which have been cited by the appellant. 11. The procedure prescribed in Rule 6(3A) of the [Cenvat] Credit Rules is only to make the provisions of Rule 3 workable. By means of proportionate reversal the requirement of Rule 6(3) has been substantially satisfied. This is also provided in Rule 6(3D) of the Cenvat Credit Rules which was introduced at a later date". 11. In view of above discussion, we find no merit in the order-in-original. Accordingly, we set aside the same and allow the appeal." * In the case of Chandrapur Magnet Wires P. Ltd. (Supra) the Hon'ble Supreme Court has passed the following decision: 3. The case of the appellants is that if a manufacturer clears various final products utilising duty paid inputs, according to Central Excise Rules, he was entitled to the benefit of MODVAT scheme and was entitled to get credit for the duty of excise paid on the inputs which were utilised for manufacture of final product. The credit amounts were adjusted against the duty leviable on the final product. As soon as the inputs were purchased, the duty paid on the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under :- "3. The credit account under MODVAT rules may be maintained chapter wise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in such exempted products i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tributed to exempted goods namely Steam, Fly-Ash and non-excisable goods i.e. electricity 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) ..... From the plain reading of the Rule 6(3), it can be seen that the law provided three options to the assessee (I), (II) accordingly the assessee has option either to pay 5%/10% of value of exempted goods or pay an amount determined under sub-rule (3A) i.e. proportionate credit attributed to the exempted goods. The appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of Cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the Cenvat credit till the payment/reversal of proportionate Cenvat credit which create a position as if the appellant have not availed Cenvat credit right from the date when Cenvat credit was availed. Therefore there is no reason for imposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be given an opportunity to argue their case before the original adjudicating authority who is directed to pass order expeditiously within a period of three months of the date of receipt of this order." * The Hon'ble Tribunal in the case of Swiss Parental Pvt. Ltd. - 2014 (308) E.L.T. 81 (T) held in para 7.3 that : "7.3 We find that the ratio of the above case laws is squarely applicable to the appellant's case. We, therefore, hold that if Cenvat credit attributable to inputs used in the manufacture of exempted final products is reversed along with interest subsequent to removal of exempted final products, then the appellant cannot be said to have taken credit of inputs used in or in relation to the manufacture of exempted final products, and they need not pay an amount @ 8% or 10% of the sale price of exempted final products. The adjudicating authority has worked out the demand of Rs. 88,41,543/- on the basis of 8% or 10% of the sale price of exempted final products cleared by the appellant during the material period, while the respondent claims that the input credit attributable to manufacture of exempted final products is only Rs. 7,85,573/-, which they have reversed. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty." * In the case of Aster Pvt. Ltd. - 2016 (43) S.T.R. 411, it was held that: "The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing his exercise of option. The contention 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 calculated under the first option. I am afraid I cannot endorse this contention. The said rule does not say that on failure to intimate, the manufacturer/service provider would lose his choice to avail second option of reversing the proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro rata credit with interest on 31-7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any." 7. In view of the above, the issue is no longer res integra, therefore, the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. As regard the submission of Ld. Counsel regarding the limitation, we find that firstly, the appellant had not utilized the Cenvat credit attributed to the exempted goods, secondly the fact regarding the availment of credit and manufacture and clearance of exempted and nonexcisable goods are very much on record, therefore, the suppres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (ii) Payment of an amount equal to the Cenvat Credit amount attributed to input services used in or in relation to manufacture of exempted goods or provision of exempted services as provided under sub rule (3A)(b). It is observed that the appellant has availed the option provided under sub-rule (3)(ii) of Rule 6 and paid an amount as per sub-rule (3A) along with interest and intimated the same to the jurisdictional superintendent in writing vide letter dated 14-3-2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit, which they have made alongwith interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004, in accordance to which, the appellant are supposed to an amount equivalent to Cenvat Credit on input service attribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 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 of the such return submitted along with appeal papers, it is observed that the particulars, as required under clause (a) of sub-rule (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6(3A), it stood made. 5.3 As regard the contention of the adjudicating authority that this option should be given in beginning and before exercising such option, we are of the view that though there is no such time limit provided for exercising such option in the rules but it is a common sense that intention of any option should be expressed before exercising the opti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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 out cars in terms of Rule 6(3A) comes to Rs. 4,06,785/- where as adjudicating authority demanded an amount of Rs. 24,71,93,529/-. In our view, any amount, over and above Rs. 4,06,785/- is not the part of the Cenvat Credit, which required to be reversed. The legislator has not enacted any provision by which Cenvat credit, which is other than the credit attributed to input services used in exempted goods or services; can be recovered from the assessee. 5.6 We have gone through judgments relied upon by the Ld. A.R. In the arguments, we found that as regards the judgments on the issue of availment of Cenvat credit on the input or input services used in dutiable and exempted goods, the provision involved in the present case i.e. Rule 6(3) (i) (ii) (3A) has not been considered in the relied upon judgments, therefore the same are not applicable. As regard the other judgments, all these judgments having different facts and dealing with other provisions such as SSI exemption, exemption notificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
