TaxTMI 
TaxTMI 
2021 (10) TMI 1285
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....f exemption Notification No. 6/2002- CE dated 0103.2002 as amended and Notification No. 4/2006-CE dated 01.03.2006 as amended. It was further noticed that the appellant availing cenvat credit for common inputs viz. Labour Contractor services, auditing and accounting services, insurance , promotion of product sales etc for which no separate accounts was maintained. Therefore, the department case is that the appellant is required to pay 10%/5% of the value of exempted goods in term of Rule 6 (3) (i) of Cenvat Credit Rules, 2004 prevailing at relevant time. Accordingly Show cause notice dated 02.02.2011 was issued wherein demand of an amount equal to 10%/5% exempted goods cleared by the appellant for the period January 2006- September 2010 was raised along with proposal for penalty under Rule 15 read with Section 11AC and interest under section 11AB of Central Excise, 1954. The Adjudicating Authority vide order-in- original dated 12.12.2014 confirmed the demand and imposed penalty and interest. Being aggrieved by the said OIO appellant filed the present appeal. 2. Shri Jigar Shah, learned Counsel appearing on behalf of the appellant submits that on pointing by the audit officers th....
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.... Shree Rama Multi Tech Ltd vs. UOI - 2011 (267) ELT 153 (Guj.) Maize Products - 2008 - TIOL- 596- HC- AHM- CX CCE vs. Ashima Dyecot 2008 (232) ELT 580 (Guj.) affirmed by Hon'ble Supreme Court - 2009 (240) ELT A41 (SC) CCE Bangalore vs. Himalaya Drug Co.- 2011- TIOL- 246- HC-KAR-CX CCE vs. Maan Pharmaceuticals - 2011 (263) ELT 661 (Guj.) CCE vs. Kudremukh Iron & Steel - 2011 (271) ELT 172 ( Kar) 2.3 He further submits that as regard the judgment of M/s Nicholas Piramal Ltd- 2009 (244) ELT 321 (Bom) relied upon by the Authorized Representative, he submits that purpose and intention of retrospective amendment to Rule 6 of the Cenvat Credit Rules, 2004 in year 2010 was just to overcome the effects of the decision of M /s Nicholas Piramal Ltd (supra). Even if the lawmakers realized that if the said decision is given effect to then the genuine assesses like the appellant would be in great hardship. Therefore, it was proposed to amend the Cenvat Credit Rules, 2004 with retrospective effect. 2.4 He Submits that after the retrospective amendement of Cenvat Credit Rules, 2004 the decision of M/....
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....tributed to the exempted final product. Therefore, the department cannot demand an amount equal to 10%/5% of the exempted final product. It is an option of the appellant either to pay 10%/5% or to pay proportionate cenvat credit attributed to the exempted final product. The department cannot impose a particular option on the appellant. As regard the delay in reversal of credit the appellant has paid the interest therefore, the option of reversal of proportionate credit as provided under Rule 6(3) (ii) of Cenvat Credit Rules, 2004 stands complied with. This issue is no longer res- integra as the identical issue has been considered in various judgments. Some of the judgments with relevant order are reproduced below:- Mercedes Benz India (P) Ltd - 2015 (40) STR 381 (Tri.Mum) 5. We have considered the submissions made by both sides. From the facts and circumstances of the case and arguments put forth by rivals, we find that the issue to be decided by us is whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rul....
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....o the manufacture of exempted goods and their clearance upto the place of removal; (ii) in or in relation to the manufacture of dutiable final products, excluding exempted goods, and their clearance upto the place of removal; (iii) for the provision of exempted services; and (iv) for the provision of output services excluding exempted services, and shall take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of clause (a) and input services under sub-clauses (ii) and (iv) of clause (b). (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow [any one] of the following options, as applicable to him, namely :- (i) pay an amount equal to five percent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv) of said clause (a) and ....
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....s as provided under sub rule (3A)(b). It is observed that the appellant has availed the option provided under sub-rule (3)(ii) of Rule 6 and paid an amount as per sub-rule (3A) along with interest and intimated the same to the jurisdictional superintendent in writing vide letter dated 14-3-2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit, which they have made alongwith interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004, in accordance to which, the appellant are supposed to an amount equivalent to Cenvat Credit on input service attributed to the exempted service in terms of Rue 6(3A). In the present case, the appellant has availed Cenvat credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to Cenvat credit which is attributed to the input service used for exem....
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....le (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6(3A), it stood made. 5.3 As regard the contention of the adjudicating authority that this option should be given in beginning and before exercising such option, we are of the view that though there is no such time limit provided for exercising such option in the rules but it is a common sense that intention of any option should be expressed before exercising the option, however the delay can be taken as procedural lapse. We also note that trading of goods was considered as exempted service from 2011 only, thus it was initial period. We are also of the view that there is no condition provided in the rule that if a particular option, out of three options are not opted, then only option of payment of....
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....,529/-. In our view, any amount, over and above Rs. 4,06,785/- is not the part of the Cenvat Credit, which required to be reversed. The legislator has not enacted any provision by which Cenvat credit, which is other than the credit attributed to input services used in exempted goods or services; can be recovered from the assessee. 5.6 We have gone through judgments relied upon by the Ld. A.R. In the arguments, we found that as regards the judgments on the issue of availment of Cenvat credit on the input or input services used in dutiable and exempted goods, the provision involved in the present case i.e. Rule 6(3) (i) (ii) (3A) has not been considered in the relied upon judgments, therefore the same are not applicable. As regard the other judgments, all these judgments having different facts and dealing with other provisions such as SSI exemption, exemption notification, etc., which are not identical to the fact of the present case, Moreover, in the present case the substantive provisions under Rule 6(3)(ii) and sub rule (3A) i.e. payment of equivalent to the Cenvat credit, which the appellant have complied with and if at all there is delay, the required interest has also ....
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....not much discussion in the order of the Tribunal, the learned Commissioner of Central Excise, has discussed the entire issue at great length. After discussing about the relevant provisions contained in the notifications, rules and submissions of the assessee‟s representative, the Commissioner of Central Excise has decided the matter against the asscssee only on the ground that manufacturer had not maintained separate books of accounts for the goods availing of the benefit of Notification No. 29 of 2004 and for the goods availing of the benefit of Notification No. 30 of 2004. He has further observed that the circular does not speak of final goods or inputs, but, it refers to the goods only and then, he came to the conclusion that as the subjected two notifications refer to the aspect of credit being taken or otherwise of inputs, maintenance of separate accounts for inputs is of prime importance. Since this condition was not satisfied, he confirmed the levy of duty, penalty, etc. This finding of the learned Commissioner of Central Excise is not in consonance with the observations made and the ratio laid down by the Honourable Supreme Court in the case of Chandrapur Magnet Wires....
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....vider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely :- (a) if the exempted goods are - (i) xxx xxxxxxxxx (ii) xxx xxxxxxxxx (iii) xxx xxxxxxxxx (iv) xxx xxxxxxxxx (v) xxx xxxxxxxxx (vi) final products falling within Chapter 50 to 63 of the said First Schedule; xxxxxxxxxxxxxxxxxxxxxxxx Even otherwise, Rule 3 says that the manufacturer or producer of the final product or provider of output services shall be allowed to take credit on various items enumerated therein. This issue had come up for consideration before the Allahabad High Court in the case of Hello Minerals Water (P) Ltd. v. Union of India, reported in 2004 (174) E.L.T. 422 (All.), wherein it is held that reversal of Modvat credit amounts to non-taking of credit on the inputs. Hence, the benefit has to be given of the notification granting exemption/rate of duty on the final products since the reversal of credit on the input was done at the Tribunal‟s stage. While arriving at this conclusion, the Allahabad High Court has referred to vario....
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....e provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining 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. From the plain reading of the Rule 6(3), it can be seen that the law provided three options to the assessee (I), (II) accordingly the assessee has option either to pay 5%/10% of value of exempted goods or pay an amount determined under sub-rule (3A) i.e. proportionate credit attributed to the exempted goods. The appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of Cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the Cenvat credit till the payment/reversal of proportionate Cenvat credit which create a posit....
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....f proportionate reversal. We also make it clear that there is no justification for demand of the amount equivalent to 10%/5% of the value of electricity wheeled out. The appellant should be given an opportunity to argue their case before the original adjudicating authority who is directed to pass order expeditiously within a period of three months of the date of receipt of this order." * The Hon‟ble Tribunal in the case of Swiss Parental Pvt. Ltd. - 2014 (308) E.L.T. 81 (T) held in para 7.3 that : "7.3 We find that the ratio of the above case laws is squarely applicable to the appellant‟s case. We, therefore, hold that if Cenvat credit attributable to inputs used in the manufacture of exempted final products is reversed along with interest subsequent to removal of exempted final products, then the appellant cannot be said to have taken credit of inputs used in or in relation to the manufacture of exempted final products, and they need not pay an amount @ 8% or 10% of the sale price of exempted final products. The adjudicating authority has worked out the demand of Rs. 88,41,543/- on the basis of 8% or 10% of the sale price of exempted final products cl....
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.... duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty." * In the case of Aster Pvt. Ltd. - 2016 (43) S.T.R. 411, it was held that : "The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing his exercise of option. The contention of the department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculated under the first option. I am afraid I cannot endorse this contention. The said ....
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....condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Therefore, keeping in view the facts and evidence on record, the demand raised by the Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro rata credit with interest on 31-7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any." 7. In view of the above, the issue is no longer res integra, therefore, the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. As regard the submission of Ld. Counsel regardi....
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....er cent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of goods at the time of clearance from their factory by adjustment in the credit account maintained under sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 of sub-rule (1) of Rule 173G or if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of the credit under Rule 57A. Sub-rule (2) thereof provided that in respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use the inputs for the aforesaid purpose and does not take credit of the specified duty on such inputs. 9. In the present case, since it was not possible to maintain separate accounts in respect of the common input viz., ink in terms of sub-rule (2) of Rule 57CC the petitioners had initially taken credit of the specified duty on such inpu....
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...., at any time during the period commencing on and from the 1st day of September, 1996 and ending with the 31st day of March, 2000, relating to the provisions as amended by subsection (1), shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times. (5) Notwithstanding the supersession of the Central Excise Rules, 1944, for the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to make 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." 11. The newly inserted Rule 57CCC of the Central Excise Rules, 1944 reads thus : THE FOURTH SCHEDULE [See section 69(1)] Sl. No. Provisions of Central Excise Rules, 1944 to be....
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....l products which are not so chargeable to duty, shall pay an amount equivalent to such credit attributable to inputs used in, or in relation to the manufacture of, such final products which are not chargeable to duty, before or after the clearance of such goods : Provided that the manufacturer shall pay an interest at the rate of twenty four percent, er annum from the date of clearance of goods till the date of payment of the said amount." 1st day of March, 1997 to 31st day of March, 2000 (both days inclusive). 12. Thus, vide sub-section (1) of the said section a new rule, viz., Rule 57CCC has been introduced in the Central Excise Rules, 1944 with retrospective effect and vide sub-section (2) thereof it has been provided that where a person opts to pay the amount in accordance with the provisions of Central Excise Rules, 1944 as amended by sub-section (1), he shall pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant certifying the amount of input credit attributable to the inputs used in or in relation to....
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.... specified thereunder and make an application to the Commissioner of Central Excise along with documents as laid down therein within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. 15. Examining the facts of the present case in the light of the newly amended statutory scheme, in the present case the petitioners were bona fide prosecuting theremedy before this Court, hence, pending the petition they have not made any application as contemplated under sub-section (2) of Section 69 of the said Act. It is the case of the petitioners that they are not required to make any such application since they have already reversed the amount of credit taken in respect of the common input used in the manufacture of product carrying nil rate of duty. However, in the light of the amended provisions of the Central Excise Rules, 1944 it is not necessary to consider the rival contentions on merits since the amended provisions take care of a situation like the present one. 16. In view of the above discussion, keeping in view the amended provisions of the Central Excise Rules, 1944 as amended by Section 69 of the Finance Act, 20....
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....is liable to compensate the Government exchequer by paying the interest amount between the period of taking cenvat credit on the common input services and actual payment of such cenvat amount into the Central Government account. 7. In view of above, the impugned order is set aside and the appeal is allowed, to the extent it has confirmed the service tax demand and imposition of penalties on the appellant. The impugned order sustains, insofar as it has confirmed the interest demand on the appellant. However, the department should quantify the actual amount of the interest payable by the appellant in terms of Paragraph 6 above. 8. In the result, the appeal is partly allowed." In view of the above judgment it settled that once the assessee reversed the proportionate credit in respect of input and input services attributed to the exempted final product and paid interest if any for the delayed reversal no further demand such as 10%/5% of value of the exempted goods can be raised. 4.1 Without prejudice to our above finding, We further find that the appellant have argued that during the relevant period the retrospective amendment in Cenvat Credit Rules vide Section....