2013 (2) TMI 35 - HC - Service Tax

Court upholds Tribunal decision, emphasizes credit reversal verification under amended rules.

The High Court dismissed the Revenue's appeal and upheld the Tribunal's decision to remand the case for fresh adjudication. The Court emphasized the need ... Applicability of Amendment to Rule 6 of the CENVAT Credit Rules, 2004 vide Finance Act, 2010 - whether Appellate Tribunal was correct in in applying it for the period from 10th September 2004 to 31st March 2008 whereas the period is dispute being April 2008 to December 2008 - Held that:- A reading of the amendment made to Rule 6 under Section 73 of the Finance Act, 2010, shows that the amendment procedure of the CENVAT Credit under Rule 6 was to have retrospective effect from September, 2004. The said amendment is provided for by insertion under Rule 6(6). Thus the said Rule covers the case of the assessees in whose cases there existed a dispute relating to adjustment of credit on inputs or input services used in or in relation to exempted final products and the period of dispute related to the period beginning from 10th September, 2004 to 31st March 2008. In such cases, as per Section 73(2) of the Finance Act, 2010, the assessee has to make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from the Chartered Accountant or a Cost Accountant, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of exempted goods within a period of six months from the date on which the Finance Bill, 2010 received the assent of the President. Thus, the Finance Act, effective from 08.05.2010 to 07.11.2010 - the six months period, expired on 07.11.2010. The period covered in this appeal is from April, 2008 to December, 2008. Admittedly, the Revenue did not raise any question as regards the non-compliance of Sub Rule (3A) of Rule 6 of the CENVAT Credit Rules before the Tribunal. The only question that was raised before the Tribunal being on the entitlement of the assessee on the reversal of credit attributable to the inputs used in the manufacture of exempted products,no justification to grant the relief sought for in the appeal. For the purpose of this case, it is not necessary at all for us to consider Section 73(2) of the Finance Act, 2010 at all. Consequently, the order of the Tribunal is confirmed. Issues Involved:1. Applicability of Amendment to Rule 6 of the CENVAT Credit Rules, 2004.2. Acceptance of oral plea without documentary evidence.3. Justification for setting aside the Adjudicating Authority's order.4. Maintenance of separate accounts for exempted and dutiable goods.5. Levy of duty for the period April 2008 to December 2008.6. Jurisdictional error in setting aside the Order-in-Original and remanding the case.Issue-wise Detailed Analysis:1. Applicability of Amendment to Rule 6 of the CENVAT Credit Rules, 2004:The Revenue questioned whether the Appellate Tribunal correctly applied the Amendment to Rule 6, which was effective from 10th September 2004 to 31st March 2008, to the period from April 2008 to December 2008. The Tribunal had remanded the matter back to the Adjudicating Authority for fresh adjudication in light of the retrospective amendment under Section 73 of the Finance Act, 2010. The Tribunal noted that the assessee had submitted an application under Section 73, which was pending decision.2. Acceptance of Oral Plea without Documentary Evidence:The Revenue contended that the Tribunal erred in accepting the oral plea of the assessee without any documentary evidence or a certificate from a Chartered Accountant or Cost Accountant, as required by Section 73(2) of the Finance Act, 2010. The Tribunal's decision was based on the retrospective amendment and the pending application by the assessee, which required further examination.3. Justification for Setting Aside the Adjudicating Authority's Order:The Tribunal set aside the Adjudicating Authority's order, which had found that the assessee did not maintain separate accounts as required under Rule 6(2) and did not follow the procedure under Sub Rule (3A) of Rule 6. The Tribunal remanded the matter for fresh adjudication, considering the retrospective amendment and the pending application under Section 73 of the Finance Act, 2010.4. Maintenance of Separate Accounts for Exempted and Dutiable Goods:The Adjudicating Authority had concluded that the assessee did not maintain separate accounts for the receipt, consumption, and inventory of inputs as required under Rule 6(2). The Tribunal, however, directed verification of whether the assessee had correctly reversed the credit attributable to the inputs used in the manufacture of exempted goods, as per the amended rules.5. Levy of Duty for the Period April 2008 to December 2008:The Revenue argued that the Tribunal misdirected itself by setting aside the levy of duty for the period from April 2008 to December 2008, amounting to Rs.1,63,40,443, along with consequential interest and penalty. The Tribunal's decision to remand the matter was based on the need to verify the correctness of the credit reversal by the assessee.6. Jurisdictional Error in Setting Aside the Order-in-Original and Remanding the Case:The Revenue claimed that the Tribunal committed a jurisdictional error by not appreciating the facts and provisions of law in setting aside the Order-in-Original and remanding the case. The Tribunal's decision was influenced by the retrospective amendment and the pending application under Section 73 of the Finance Act, 2010.Conclusion:The High Court dismissed the Revenue's appeal, confirming the Tribunal's order to remand the matter for fresh adjudication. The Court emphasized that the Tribunal's decision was based on the need to verify the correctness of the credit reversal by the assessee and the retrospective amendment under Section 73 of the Finance Act, 2010. The Adjudicating Authority was directed to consider the contentions of the assessee under the amended rules.