TaxTMI 
TaxTMI 
2021 (11) TMI 299
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....010 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 benefit of Cenvat credit on inputs used in manuf....
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....ules, 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 receipt, consumption and inventory of input and input service m....
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....hat 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 manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month, - (i) The amount equivalent to CENVAT credit attributable....
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....empted 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 not paid within the said due date; (f) Where the amount determined as per condition (e) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adj....
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.... 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 Collector of Central Excise, Nagpur [1996 (81) E.L.T. 3 (S.C.)]. Paragraph 7 of the judgment reads as follows:- "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 en....
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....ment 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, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, as published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 600(E), dated the 10th September, 2004, rule 6 shall stand amended and shall be deemed to have been amen....
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....me 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 requested from the experts of IIT, Roorkee by making a reference vide this office letter dated 06.01.2011. The experts from IIT Roorkee paid a visit to the unit and submitted their comments which are as under :- 1. The basic calculation done by Hamdard Laboratories seem to be applicable in the determination of consumption of Furnace oil except for inclusion of efficiency factor (which as mentioned by them is 75%....
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.... 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 objection is concerned if 75% efficiency is considered for consumption of furnace oil, more furnace oil should be consumed for the same process. For instance, if producing a certain quantity of steam at 100% efficiency 100kg of furnace oil is required, if boiler is only 75% efficient, then 133 kg. of furnace oil should be consumed to produce the same amount of steam. Therefore, more Cenvat credit should have been available to the appellant and not less. H....
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.... 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 self created mechanism as already discussed in the preceding paras, which was not accepted by the department. 39. In the light of the above discussions, I find that being the similar facts & circumstances in the present case, I do not find any reason to deviate from my earlier findings vide the Order-in-Original No. 42-43/Commr./GZB/2010-11 dated 21.03.11 passed on the similar issue. I, therefore, of the considered view that the party is not eligible to avail CENVAT Credit on FO used as fuel on ....
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....on. 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 subsequent periods decided in the second impugned order, the Commissioner has observed in paragraph 35 as below :- "(i) the party did not properly followed Rule 6 (2) of Cenvat Credit Rules, 2004 and separate records were not maintained as per the spirit of the rule. (ii) Rule 6 (3) of Cenvat Credit Rules, 2004 was not followed properly. Though option which was available from 01.04.2010, has been exercised by the party, but it was based on the formula which was their self created mechanism and has not been ap....
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....r 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. The appellant does not have separate boilers to generate steam used in manufacture of dutiable and exempted products. It also does not have separate machinery for generation of sugar syrup which is further used in manufacture of dutiable and exempted products. The furnace oil which has gone into production of steam is further used in manufacture of syrup, which is further used in manufacture of both dutiable and exempted products. Therefore, accounts can only be maintained by corresponding credit and debit entries reversing proportionate amount of Cenvat ....
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....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, the impugned order must fail on this count as well. 32. The next issue is whether the appellant can be compelled to choose one of the options under Rule 6 of Cenvat Credit Rules, 2004. The High Court of Telangana and Andhra Pradesh in the case of Tiara Advertising (supra) explained the scope of Rule 6 and observed that this provides for various options in the form of Rule 6 (1), 6 (2) and 6 (3) etc. There is nothing in this Rule which authorizes the Commissioner or any Departmental Officer to choose a particular option for the assessee and force the assessee t....