TaxTMI 
TaxTMI 
2009 (4) TMI 508
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....y manufactured the exempted finished products, namely Vanaspathi, Bakery Shortening Inter-esterified fat, Margarine, Refined oils, etc. falling under Chapter 15 of CETA, 1985. They used the following common inputs :- (i) Crude palm oil (ii) Hydrogen Gas (iii) Nickel Catalyst 4.  The Revenue proceeded against the appellants on the ground that the appellants were required [under Rule 6(3)(b) of the Cenvat Credit Rules, 2002/2004] to maintain separate accounts for both the dutiable and exempted products and take the Cenvat credit only on that quantity of input which is intended for use in the manufacture of dutiable products. As the assessee did not maintain separate accounts for receipt, inventory and consumption of inputs as prescribed in the said Cenvat Credit Rules, a show cause notice was issued for demand of an amount equal to 8%/10% of the total price excluding sale tax and other tax in' respect of exempted goods under Rule 6(3)(b) of the Cenvat Credit Rules, 2002/2004. In fact two show cause notices were issued for two different periods. As the issued involved is one and the same, the Commissioner issued a co....
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....king Cenvat credit on common input namely, hydrogen gas on pro-rata basis without maintaining any statutory register for receipts, consumption and inventory separately for manufacture of both dutiable and exempted final products was correct. Therefore, she confirmed the demands made in the show cause notices. She has relied on the decision of the Larger Bench of the Tribunal in the case of Rallies India Ltd. v. CCE, Salem [2007 (208) E.L.T. 25 (Trib. - L.B.)] in her order. She did not follow the ratio of the other case laws cited by the appellants in their favour. The appellants are highly aggrieved over the impugned order. 6. The learned Sr. Counsel appeared for the appellants urged the following points :- (i)  The appellants had restricted the availment of credit of all the common inputs by availing credit only on pro-rata basis. Neither the practice nor the quantum of pro-rata availment has ever been questioned or disputed by the Revenue. The work register indicating the consumption details along with bin cards clearly indicated maintenance of separate accounts for all the three common inputs i.e. crude palm oil, hydrogen gas and nickel catalyst and a further availme....
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....dication proceedings and the factum of maintenance of separate accounts never in dispute. (iii) In the above circumstances, the only question that arises for consideration is whether in terms of Rule 6 of the Cenvat Credit Rules, 2004, an assessee should maintain separate inventory or would it be sufficient if an assessee maintains separate accounts for receipt, consumption and inventory of inputs services. A plain reading of Rule 6(2) of the Cenvat Credit Rules provides the answer. The expression employed in the said sub rule is 'the manufacturer' or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input services....'. The expression employed in the said rule is 'shall maintain separate accounts for ...' and not 'shall maintain separate inventory'. Consequently the finding of learned Commissioner that the appellants have not maintained separate inventory and therefore have not satisfied the provisions of Rule 6(2) is clearly erroneous. The learned Sr. Counsel referred to Rule 57CC as it was introduced for the first time in the year 1996. The Rule 57CC(9) at the relevant point of time read as follows : "The manuf....
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....of the Cenvat Credit Rules. Further, it was held that the appellants should have paid it in advance before waiting for the Department to point it out and issue show cause notices. It was reiterated that the entire credit had been reversed and there is no question of pro-rata availment to come within the ambit of Rule 3 of the Cenvat Credit Rules, 2004 and consequently the finding of the Commissioner is not maintainable. In any view, this issue is no longer res-integra in view of the decision of the Larger Bench in case of Nicholas Piramal (I) Ltd. v. CCE, Thane-I [2008 (89) RLT 566 (T) (L.B.) = 2008 (232) E.L.T. 37 (Tribunal-LB)] wherein the Larger Bench was pleased to hold that the reversal of credit would tantamount to non-availment of credit and the rigours and consequences of Rule 6(3)(b) would not follow suit. (v) The learned Sr. Counsel referred to minority view in Nicolas Piramal's case (supra) and elaborated the points raised by the learned Member. The minority view proceeds to hold the following :- (a) The literal rule demands that if a meaning of the statutory interpretation is plain, courts must apply the same, regardless of the results. (b) The introdu....
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....sed in the show cause notice is over Rs. 16 crores. (iv) It is not proportionate credit but the entire credit taken on inputs which had been reversed. (v) No reasonable or prudent man would prefer a beneficial enjoyment of Rs. 3.15 lakhs at the cost of Rs. 16 crores. The rule of literal interpretation is not an inflexible rule as held in the minority view. (c)  Legal Maxim. "De Minimis Non Curat Lex". It means - Diminutives are not noticed by law i.e. law cares not for small things. The law does, not notice or concerns itself with trifling matters. Courts of justice generally do not take trifling and immaterial/matters into account, except under peculiar circumstances, such as the trial of a right, or where personal character is involved. The Hon'ble Supreme Court has also applied this principle in the case of State of Bihar and Others v. Harihar Prasad Debuka and Others [1989 (2) SCC 192 at 208] (d)  Revenue neutrality : Even if there is violation of rules, there can be no demand. Reliance was placed in the Apex Court judgment rendered in the case of Punjab Tractors Ltd. v. CCE [2005 (11) SCC 210 = 2005 (181) E.L.T. 380 (S.C.)]. In this case, in spite of a....
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....Rules. Rule 6 only deals with an obligation which a manufacturer or an output service provider should comply with in such cases where they are engaged in the manufacture of dutiable/exempted goods or taxable/exempted services. (iii) Rule 6(2) obligates maintenance of separate accounts for receipt, consumption and inventory of input and input services meant for use to the manufacture of, dutiable final products or in providing output services. (iv) Rule 6(3) and Rule 6(3A) provide the mechanism to pay either an amount equivalent to 10% of the value of the exempted goods or 8% of the value of the exempted services. In the alternative Rule 6(3A) provides the manner of determination and payment of amount under sub clause (ii) of sub-rule (6)(3) of the Rules. (v) The rules are therefore procedural and not substantive. (vi) The Hon'ble Supreme Court under similar circumstances, while examining the applicability of erstwhile Rule 57E retrospectively was pleased to hold as follows in the case of Commissioner of Central Excise v. Home Ashok Leyland Ltd. [2007 (4) SCC 51 = 2007 (210) E.L.T. 178 (S.C.)] :- "The above discussion indicates that the right to claim Modvat cred....
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....d not suppressed any information. Hence penalty cannot levied. Levy of penalty is not automatic. Revenue has not given any evidence with regard to suppression. Onus to prove is on the Revenue. End use certificates have been quarterly/half yearly issued by the department after examining all previous production records. Hence they are aware of the use of all inputs. Audit party who visited the appellant's factory have gone through all the records, such as bin cards, work register purchase invoices of hydrogen gas and nickel catalyst, Cenvat Credit Register, etc. They were fully aware of methodology of availing credit on proportionate basis and never commented about maintaining insufficient records. The Revenue has not disputed availing credit of duty on pro-rata basis only on inputs used in manufacture of dutiable products. Hence the original authority's observation that fact of non-availment of credit on inputs used in exempted products is not known to the Department or fact of pro-rata availment of credit on inputs used in manufacture of dutiable product is not known to the department is erroneous. Penalty, unlike duty, is not automatic and calls for discharge of proof by the Reven....
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....ad not taken entire credit on the duty paid on the inputs used in dutiable and exempted products. It is on record that they had availed credit on pro-rata basis. In other words, the credit has been taken only in respect of inputs used in dutiable products. It is a fact that the appellants have stated that they could not have separate inventory for the input used in dutiable and exempted products. That does not mean that they have not maintained separate accounts for the receipt and consumption of inputs used in dutiable and exempted products. A distinction was made between maintain separate inventory and accounts of inventory referring to Rule 57CC(9) and Rule 6. Our attention was invited to the sample copies of the work register for consumption details of the inputs along with entries in Cenvat register availing pro-rata credit. The details of the availment of credit on pro-rata basis in respect of hydrogen gas was submitted in reply to the show cause notice dated 28-1-2008. Similarly in respect of Crude palm oil and Nickel Catalyst. the pro-rata availment details of credit has been given, All these shows that the appellants had not availed the entire credit for both dutiable and ....
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....t when the entire credit has been reversed, it would tantamount to non-availment of credit and the rigours and consequences of Rule 8(3)(b) would not follow suit. 10.  The learned Advocate took the point stressed on the untenability of minority view in Nicolas Piramal (I) Ltd. case (supra). He relied on the several decisions of the Hon'ble Apex Court and also authoritative legal treatises. Inadvertently, the appellant had taken input service tax credit in the entire amount instead of pro-rata basis. When the lapse was pointed out the entire credit was reversed. In other word an act which is done has been undone. This is called a 'Principle of Restoration'. The original position is restored, when an act done is undone. In the context of the present case, the reversal of entire input service tax credit taken amounts to not taking credit at all. In a Sales Tax case, the assessee collected the sales tax from the purchasers and later refunded to them. The Hon'ble Madras High Court considered that this would amounts not collecting the tax at all. Even in the Chandrapur Magnets case, the Hon'ble Apex Court has held that reversal of Cenvat credit would amounts not taking the credit. ....