TaxTMI 
TaxTMI 
2021 (11) TMI 299
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....N dated 06.04.2011 (covering period 01.03.2010 to 31.03.2010), SCN dated 06.05.2011 (covering the period 01.04.2010 to 31.05.2010) and SCN dated 01.06.2011 (covering the period 01.06.2011 to 31.03.2011) have been decided confirming the demand of Rs. 3,51,96,966/-. 3. Thus, in these two impugned orders covering the period 16.05.2005 to 31.03.2011, a total demand of Rs. 12,79,85,170/- has been confirmed under Rule 6 read with Rule 14 of the Cenvat Credit Rules, 2004 along with interest under Rule 4 of Cenvat Credit Rules read with Section 11AB of the Central Excise Act and penalty under Rule 15 of Cenvat Credit Rules read with Section 11AC of the Central Excise Act. 4. We have heard both sides and perused the records. 5. The appellant manufactures edible preparations falling under Chapter 21, Unani medicines falling under Chapter 30 and Cosmetics and Toilet preparations falling under Chapter 33 of the First Schedule to the Central Excise Tariff Act, 1985 [the Tariff Act]. Some of these goods are dutiable and others are exempted from duty. The appellant availed the benefit of Cenvat credit on the inputs used exclusively in manufacture of dutiable goods and had not availed the....
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.... these rules as well as the erstwhile Modvat Credit Rules, that credit shall be allowed only on inputs which go into manufacture of dutiable goods. No credit shall be allowed in respect of inputs which go into manufacture of exempted goods. 8. However, there are always inputs which go into manufacture of both dutiable and exempted goods such as the furnace oil used in the present case is one such. Rule 6 of the Cenvat Credit Rules, 2004 deals with "Obligations of manufacturer of dutiable and exempted goods and provider of taxable and exempted services". Rule 6 (1) states that credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or provision of exempted services. Rule 6 (2) requires separate accounts to be maintained and it reads as follows:- "6 (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for r....
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....maining 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 exempted goods or provision of exempted service. 6 (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service 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 :- (i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised ; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) The manufactu....
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....nput services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, M denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year, and N denotes total CENVAT credit taken on input services during the financial year ; (d) The manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid ; (e) The manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is n....
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....the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under Section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder. Explanation II - The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month of March. Explanation III - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in Rule 14, for recovery of CENVAT credit wrongly taken.]" 11. Rule 6(3A) was further modified changing the formula for calculation. 12. The first submission of learned Counsel for the appellant was that if credit has been taken and thereafter reversed, it is good as not having taken the credit at all. He relies on the judgment of the Supreme Court in Chandrapur Magnet Wires (P) Ltd. versus Colle....
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....ld be taking credit in violation of Cenvat Credit Rules, 2004 and such wrongly availed Cenvat credit can be recovered under Rule 14. But in no circumstances can the Department foist a particular choice upon the appellant and demand an amount under Rule 6 (3) as has been done in these show cause notices. He relies on the judgment of the High Court of Andhra Pradesh and Telangana in the case of M/s Tiara Advertising versus Union of India [2019 (10) TMI 27]. He also relies on the following other case laws :- (i) Star Agriwarehousing & Collateral Management Ltd. versus CCE & ST, Jaipur (Rajasthan) - 2020 (10) TMI 198 - CESTAT NEW DELHI (ii) M/s Mercedes Benz India (P) Limited versus Commissioner of Central Excise, Pune - I - 2015 (8) TMI 24 - CESTAT Mumbai (iii) The Oberoi Rajvillas versus CCE, Jaipur - 2018 (5) TMI 1715 - CESTAT New Delhi 15. The third submission of learned Counsel is that in order to clear the confusion, Finance Act, 2010 had made a retrospective amendment to cover the period 16.05.2005 to 31.03.2008. This reads as follows :- "Amendment of rule 6 of CENVAT Credit Rules, 2004. - 73. (1) In the CENVAT Credit Rules, 2004, ....
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.... rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, retrospectively, at all material times. Explanation. - For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this section not come into force. 16. Learned Counsel submits that it is undisputed that they had filed a declaration under this amendment along with details of the debit made which has been recorded by the Commissioner and paragraph 6.15 in the first impugned order. He, however, rejected the same stating that the appellant had not done the calculations correctly. The relevant portion of the impugned order is as follows :- "6.15 I find that the party opted for the provisions of Section 73 (2) of the Finance Bill 2010 on 07.06.2010 i.e. within the stipulated period. I also find that they have submitted a certificate of the Chartered Accountant certifying the amount of credit attributable to exempted goods. 6.16 To verify the correctness of their calculations, a report in this regard was request....
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....2010 to reject the application even if the amount paid is found to be insufficient. In the first impugned order, the learned Commissioner has mis-conceived the provision and rejected the application assuming that power which has not been conferred under the Act on the ground the amount paid was insufficient. He, therefore, demanded an amount equal to 10% of the value of the exempted goods as per another option which the appellant had not chosen. The Commissioner has chosen to foist upon the appellant an option, which is impermissible. 18. On the specific observation of the Commissioner pointing out the deficiencies in the calculations, learned Counsel submits that the learned Commissioner had sought opinion of experts from IIT, Roorkee and the observations, cited in paragraph 6.16 of the first impugned order are as follows. "(i) for consumption of furnace oil, the efficiency factor should be taken as 75% instead of 100% for calculating the exact amount of furnace oil consumed ; (ii) the inter-se distribution of consumption of furnace oil between dutiable and non-dutiable items depend on the monthly production of these items". 19. As far as the first objectio....
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....cords as specified under Rule 6 (2) of Cenvat Credit Rules, 2004. (iii) they were availing the proportionate Cenvat credit as per their own self devised calculation in respect of the FO used in the exempted goods at the end of the month. (iv) the calculations were not in accordance with Central Excise, Cenvat Credit Rules as the option exercised vide letter dated 01.04.2010 did not conform to the provisions as provided under Cenvat Credit Rules. (v) they were also not maintaining separate records as specified in Rule 6 (2) of Cenvat Credit Rules, 2004, thus they were liable to pay an amount equal to 5% of the total price of exempted clearance from 01.06.2010 and onwards in accordance with Rule 6 (3) (i) of Cenvat Credit Rules, 2004. 38. In view of the provisions of Rule 6 (3A) of CENVAT Credit Rules, 2004, I find that the party has exercised the option under Rule 6 (3A) of CENVAT Credit Rules, 2004 for Furnace Oil, but without following the procedure of quantification as provided under sub-rules (3A) (b) to (3A) (i) of Rule 6. I also find that the quantification adopted by the party under the said option was not much different from their earlier ....
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....ed for manufacture of dutiable and exempted products which the appellant has not done. Since the appellant has not followed Rule 6 (2) it is bound pay an amount equal to 10% of the value of goods under Rule 6 (3). The demands were confirmed accordingly. For the period prior to 2010, the Finance Act, 2010 provided an option to the appellant to reverse proportionate amount of Cenvat credit attributable to the inputs used in manufacture of exempted goods. Undisputedly, the appellant opted for it and filed a declaration. The Commissioner got the declaration verified by experts from IIT, Roorkee who made two observations which were found important by the Commissioner namely (i) the efficiency must be considered as 75% for consumption of furnace oil instead of 100%; (ii) the inter-se consumption between the dutiable and exempted products depends upon the monthly production of such products. The experts do not appear to have made any other remark regarding the calculation and reversal by the appellant. The Commissioner has understood this expert opinion to mean that the appellant has not correctly reversed the Cenvat credit and, therefore, rejected the contention of the appellant. For the....
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....es (P) Ltd. (supra), the Supreme Court has observed as follows in paragraph 7 :- "7. In view of the aforesaid clarification by the Department, we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in manufacture of these goods". 27. Therefore, if an entry is made taking a credit and another entry is made reversing the earlier entry, it is as good as not taking the credit at all. This is the only practical way of maintaining separate accounts for some industries such as the one of the appellant. 28. The issue in the present case is a little more complex. T....
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.... upon monthly production. The appellant has, according to the learned counsel, debited the amount of Cenvat credit accordingly. The quantity of dutiable and exempted products manufactured by the appellant are a matter of record. The quantity of furnace oil attributable to unit quantity of each of those products is a technical matter. The appellant has used the technical report to debit and there is nothing in the Commissioner's order to show that the calculations were wrong and more or less of furnace oil was attributable to the production of exempted goods and if so, by how much. 31. Interestingly, in the second impugned order, the Commissioner states the appellant has not followed Rule 6 (3) of Cenvat Credit Rules, 2004 properly and that "it was based on a formula which was their self-created mechanism and has not been approved by Competent Authority". We do not find anything in Rule 6(3) which designates a Competent Authority or which requires of approval of the formula by any Competent Authority or by the Commissioner. Of course, if the debit was incorrect, the Commissioner could have said why and explained what would be the correct amount. He did no such thing. Therefore, t....