2023 (5) TMI 260 - AT - Central Excise

Tribunal remands appeal for reconsideration. No reversal of input credit. Decision on 27/04/2023.

Siemens Ltd Versus Commissioner of Central Excise, Customs & Service Tax, Aurangabad

The Tribunal allowed the appeal by remanding the matter back to the original authority for reconsideration in light of the decision in a similar case. The ... CENVAT Credit - clearance of both dutiable and exempted goods - non-maintenance of separate records - applicability of notification issued under section 5A of Central Excise Act, 1944 - non-conformity with notification no. 6/2006-Central Excise dated 1st March 2006 - HELD THAT:- The proceedings for denial of credit under rule 6 of CENVAT Credit Rules, 2004 was instituted, and confirmed, for non-conformity with notification no. 6/2006-Central Excise dated 1st March 2006 and, while conceding eligibility for exemption in accordance with notification no. 46/2008-Central Excise dated 14th August 2008, it was held that the additional entry made thereby in notification no. 6/2006-Central Excise dated 1st March 2006 came to be incorporated in the exclusions in rule 6(5)(vii) of CENVAT Credit Rules, 2004 only from 2010 onwards. Implicit in this conclusion is that the appellant could not have cleared finished goods without payment of duty only after 14th August 2008 and not prior to that. There is no doubt that the period of dispute is from 7th July 2009 to 28th February 2010 and by that time serial no. 91A, specific to power projects such as that of M/s Coastal Gujarat Power Ltd, had been inserted in notification no. 6/2006-Central Excise dated 1st March 2006 in addition to the existing serial no. 91 pertaining to award of project by ‘international competitive bidding’ procedure but that does not erase existing eligibility. Much of the argument of both sides has revolved around the nature of the incorporation effected in rule 6(5)(vii) of CENVAT Credit Rules, 2004 from 27th February 2010 after which, it is common ground, the entitlement for retention of CENVAT credit is unquestioned. According to the appellant, it is clarificatory and, therefore, accords retrospective eligibility while it is the contention of Learned Authorised Representative that, being additional inclusion, the incorporation has prospective effect - In THE COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX AND THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S FOSROC CHEMICALS (INDIA) PVT LTD AND OTHERS [2014 (9) TMI 633 - KARNATAKA HIGH COURT], the Hon’ble High Court of Karnataka, taking note of the intent of coverage of ‘export’ extending to goods supplied to both ‘unit’ in, and ‘developer’ of, ‘special economic zones (SEZ)’ in Special Economic Zones Act, 2005 and the exclusion provided in rule 6(5)(vii) of CENVAT Credit Rules, 2004, held that the said amendment has to be construed as retrospective in nature and the benefit of Rule 6(6)(i) as amended in 2008 has to be extended to the goods cleared to a “developer” of a Special Economic Zone for their authorized operations. The entitlement of the appellant to exemption at serial no. 91 of notification no. 6/2006-Central Excise dated 1st March, 2006 for which the Tribunal had directed production of evidence thereto and, thereby, to the exclusion from reversal contemplated in rule 6 of CENVAT Credit Rules, 2004 needs to be examined on the basis of facts now made available. It is from the acknowledgement of ‘import substitution’, implicit in the privilege of exemption from duties of central excise, enabling exclusion from reversal that this conclusion is arrived. The matter remanded back to the original authority for consideration of all submissions - appeal allowed by way of remand. Issues Involved:1. Eligibility of CENVAT credit on goods/services for manufacturing exempted goods.2. Requirement to maintain separate accounts for dutiable and exempted goods.3. Applicability of Rule 6 of CENVAT Credit Rules, 2004.4. Retrospective applicability of amendments to Rule 6(5)(vii) of CENVAT Credit Rules, 2004.Summary:Issue 1: Eligibility of CENVAT CreditThe primary issue was whether M/s Siemens Ltd was eligible to take CENVAT credit on goods/services procured for manufacturing and supplying 'excisable goods' without payment of duty under an exemption notification issued under section 5A of the Central Excise Act, 1944. The central excise authorities contended that since the assessee was clearing both dutiable and exempted goods, they were required to maintain separate accounts for 'duty paid inputs' in both streams, failing which they had to reverse credit to the extent of 5% of the value of exempted goods.Issue 2: Requirement to Maintain Separate AccountsThe appellant did not maintain separate accounts as prescribed in Rule 6 of CENVAT Credit Rules, 2004. The Commissioner of Central Excise directed recovery of Rs. 91,09,692 under Rule 14 of CENVAT Credit Rules, 2004, along with applicable interest, and imposed a penalty of Rs. 10,00,000 under Rule 15 of CENVAT Credit Rules, 2004.Issue 3: Applicability of Rule 6 of CENVAT Credit Rules, 2004The dispute centered on the credit attributable to 'inputs' that could not be distinguished at the time of procurement as those that would ultimately be used for manufacturing exempted goods. The appellant argued that goods supplied to eligible projects, not exempted except in the hands of the purchaser, should not be considered 'exempted goods' under Rule 2(d) of CENVAT Credit Rules, 2004, and thus should not require credit reversal under Rule 6(2) or neutralization under Rule 6(3).Issue 4: Retrospective Applicability of AmendmentsThe central excise authorities argued that the exclusion from the obligation to reverse credit attributable to 'inputs'/'input services' for manufacturing goods supplied to eligible 'power projects' came into effect only by the amending notification of 27th February 2010. The appellant, relying on the Karnataka High Court decision in Commissioner of Central Excise & Service Tax, Bangalore v. Fosroc Chemicals (India) Pvt Ltd, contended that the amendment was clarificatory and should be applied retrospectively.Conclusion:The Tribunal acknowledged the intent of 'import substitution' implicit in the privilege of exemption from duties of central excise and the exclusion from reversal. The matter was remanded back to the original authority for reconsideration of all submissions on facts and the ratio of the decision in re Fosroc Chemicals (India) Pvt Ltd. The appeal was allowed by way of remand.Order Pronounced:The order was pronounced in the open court on 27/04/2023.