2013 (2) TMI 142 - HC - Central Excise

Court rules no retrospective effect for Rule 6 amendment. CENVAT credit not needed, no 10% payment required.

The Commissioner of Central Excise, Salem Versus M/s. Burn Standard Co. Ltd.

The High Court upheld the Tribunal's decision that the amendment to Rule 6 of the CENVAT Credit Rules, 2004 did not have retrospective effect for the ... Notification No.10/2008 CE (NT) dated 1st March 2008 brought the amendment to Rule 6 of the CENVAT Credit Rules, 2004 with effect from 1st April 2008 - whether the said amendment has the retrospective effect ? - Whether the inference drawn by the Tribunal that the respondent need not pay the amount at 10% of the price at which the DBM was cleared during the months of January and February, 2008 on the ground that the respondent had not availed CENVAT credit during the said months is correct? - Held that:- When the assessee had consistently taken the stand that it had not made any credit entry for the period January and February 2008, the question of any reversal of entry does not arise and only for the month of March 2008, where there was a reversal of entry, the claim has to be verified on the basis of the formula provided under Rule 6(3A) of the CENVAT Credit Rules. Hence, no exception could be taken to the order of the Tribunal. Respectfully agreeing with the decision of the Gujarat High Court in Shree Rama Multi Tech Ltd Vs. Union of India (2011 (2) TMI 575 - GUJARAT HIGH COURT) it is held that as on the date of the adjudication order and on the date of filing the appeal too, Section 73(2) itself was not available and that it was amended under the Finance Act, 2010 only during the pendency of the appeal. Thus, with the bona fide prosecution of the appeal no justifiable ground to accept the stand taken by the Revenue that in the absence of compliance of the conditions in Section 73(2) of the Finance Act, 2010 within the six months' period, the claim of the assessee has to fail. The question of such a compliance as on the date of adjudication or filing of the appeal not being there, when the Tribunal felt, on facts, that it was necessary to remand the matter back to the Adjudicating Authority. Thus, we have no hesitation in confirming the order of remand restoring the matter back to the Adjudicating Authority to consider the claim of the assessee. Direct the assessee to produce necessary evidence in the form of certificate from a Chartered Accountant or a Cost Accountant for the relevant period, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of final product, which are exempt from the duty, along with documents on the reversal of entry made before the Adjudicating Authority. Issues Involved:1. Retrospective effect of Notification No.10/2008 CE (NT) dated 1st March 2008.2. Correctness of the Tribunal's inference regarding non-payment of 10% of the price for DBM cleared in January and February 2008.3. Direction by the Tribunal to verify the reversal of credit for March 2008 in light of the Finance Act, 2010.4. Necessity of modifying the Tribunal's Final Order No.609/2010 dated 7.6.2010.Issue-wise Detailed Analysis:1. Retrospective Effect of Notification No.10/2008 CE (NT) dated 1st March 2008:The Revenue appealed on the question of whether the amendment to Rule 6 of the CENVAT Credit Rules, 2004, effective from 1st April 2008, could be considered to have retrospective effect. The Tribunal had held that the amendment did not have retrospective effect. The High Court upheld this view, agreeing with the Tribunal's interpretation that the amendment could not be applied retrospectively to the period from January to March 2008.2. Correctness of the Tribunal's Inference Regarding Non-Payment of 10% of the Price for DBM Cleared in January and February 2008:The Tribunal inferred that the respondent need not pay 10% of the price for DBM cleared in January and February 2008, as the respondent had not availed CENVAT credit during these months. The High Court examined the evidence, including the respondent's statements and flow meter readings, and found that the respondent had indeed not taken CENVAT credit on furnace oil used for exempted goods in January and February 2008. The Court found no material from the Revenue to contradict this claim and upheld the Tribunal's inference.3. Direction by the Tribunal to Verify the Reversal of Credit for March 2008 in Light of the Finance Act, 2010:The Tribunal directed the Adjudicating Authority to verify the reversal of credit for March 2008 based on the formula provided under Rule 6(3A) of the CENVAT Credit Rules, 2004. The High Court agreed with this direction, noting that the respondent had reversed the credit taken for March 2008 and that this needed to be verified according to the correct formula. The Court cited the Gujarat High Court's decision in Shree Rama Multi Tech Ltd Vs. Union of India, which supported the need for such verification in light of the Finance Act, 2010.4. Necessity of Modifying the Tribunal's Final Order No.609/2010 dated 7.6.2010:The Revenue contended that the Tribunal's order required modification due to the non-compliance with Section 73(2) of the Finance Act, 2010. However, the High Court pointed out that the amendment to Section 73(2) was not in place at the time of the adjudication or the appeal filing. The Court held that the Tribunal's decision to remand the matter for verification was appropriate and did not require modification. The Court directed the respondent to produce the necessary evidence, including a certificate from a Chartered Accountant or Cost Accountant, to support their claim during the remand proceedings.Conclusion:The High Court dismissed the civil miscellaneous appeal, confirming the Tribunal's order to remand the matter back to the Adjudicating Authority for verification of the reversal of credit for March 2008. The Court directed the respondent to provide necessary evidence for the relevant period to the Adjudicating Authority. The appeal and the associated miscellaneous petition were dismissed without costs.