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2023 (8) TMI 1135
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....emand for the extended period. 2. Shri, Amal Dave Learned Counsel appearing on behalf of the assessee submits that on merit the Learned Commissioner confirmed the demand, only on the ground that there is no statutory provision for reversal of proportionate credit in the Cenvat Credit Rules, 2004. Therefore, the reversal cannot be accepted and the only option is to pay 10% /6%/5% amount equal to value of exempted goods. It is a submission that the Adjudicating Authority has completely discarded the settled legal position in this regard. He placed reliance on the following Judgments: CST, Kolkata V/s. Surya Vistacom Pvt. Ltd. 2022 (66) GSTL 290 (Cal.) Welspun Corp. Ltd. V/s. CCE, Kutch 2019(368) ELT 179 (Tri.-Ahmd.) Reliance Life Insurance Co. Ltd. V/s. CST, Mumbai 2018(363) ELT 1050 (Tri.-Mumbai) CCE, Ahd-II V/s. Maize Products 2009 (234) ELT 431 (Guj.) CCE V/s. Maan Pharmaceuticals Ltd. 2011 (263) ELT 661 (Guj.) Final order No. A/12475/2021 dated 29.10.2021 passed by the CESTAT, Ahmedabad in case of M/s. Sanstar Bio Polymers Limited. 2.1 He further submits that as regard the Revenue's appeal, the Adjudicating authority has....
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....e being maintained nor payment at the prescribed rate on the value of exempted goods was being made. Thus, this amply makes it clear that the department was indeed in knowledge of the practice followed by the said assessee. The icing on the cake for the said assessee is also a letter dated 17.08.2010 issued from F.No. VI/1(b) 117/A/2010-11 issued by the Audit Officer asking the said assessee to pay amount as per a certain ratio worked out. The relevant portion of the same reads as under: "You are manufacturing dutible goods as well as exempted goods and maintained separate accounts for inputs used in dutiable and exempted goods as per Rule 6(2) of Cenvat Credit Rules, 2004. On verification of records, financial accounts and ER-1 returns, it was noticed that in the year 2008-09 the total clearance value was Rs. 16,70,09,325/- Out of the same the value of dutiable clearance I value was Rs. 10,85,82,425/- and the value of exempted goods was Rs. 5,11,26,900/- The total purchase value (commercial) of the inputs (excisable raw material) consumed for the said year is Rs. 9,73,76,163- Involving Cenvat credit of Rs 1,17,55,453- Out of the same, the value for inputs consumed for the....
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....ce same was rightly set aside by the Adjudicating Authority. 4.2 As regard the appeal of the assessee there is a confirmation of demand of Rs. 4,05,120/-. This demand was confirmed on merit by the Learned Commissioner, on the ground that there is no statutory provision for such reversal of proportionate credit, the only option for the assessee is to pay 5%/6%/10% of the value of the exempted goods. This contention of the Adjudicating authority is absolutely incorrect for the reason that even though there is no exclusive provision for such reversal but there are catena of case laws. Wherein, the issue has been decided in favour of assessees. Wherever, there is proportionate reversal of credit along with interest, if any required. This was consistently held on the pretext that reversal of credit along with payment of interest, would create a situation as if no Cenvat credit was availed and on that basis the provision of Rule 6(3) whereby the amount of 5%/6%/10% is payable shall not apply. This issue has been considered in the following judgments: a) In the case of Surya vistacom Pvt. Ltd (Supra) Hon'ble CALCUTTA HIGH COURT has passed the following judgment: "13. As poi....
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....redit in respect of input services attributed to the exempted goods/non-excisable goods along with interest, whether the demand confirmed by the Revenue under Rule 6(3) i.e. 5%/10% on value of exempted goods is legal and proper. The appellant is not disputing that the Cenvat credit in respect of input services attributed to exempted goods namely Steam, Fly-Ash and non-excisable goods i.e. electricity sold outside their factory, is not admissible and they have admittedly reversed the proportionate Cenvat credit and also paid the interest from the date of taking credit till the date of reversal. For ease of reference, we reproduce below the Rule 6(3) of Cenvat Credit Rules, 2004 : (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 either of the following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or (ii) the manufactu....
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....nvat credit is reversed, it is to be considered ab initio not availed. In the light of this judgment of the Hon'ble Supreme Court, the reversal of Cenvat credit already made by the appellant is to be considered as not taken ab initio. The Government has introduced the facility of proportionate reversal w.e.f. 1-4-2008 to mitigate the difficulties faced by manufacturers to maintain separate accounts for inputs/input services as well as when the same are commonly used for dutiable as well as exempted products/services. Though detailed procedure starting with an option to be exercised by manufacturer has been prescribed, in the present case, the appellant has not followed the same. However, it is on record that they have already reversed an amount claimed to be proportionate. It is also pertinent to record that this has been done by the appellant even before the issue of the show cause notice in this case. We are of the considered view that the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given an....
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.... record, we find that the method adopted by the adjudicating authority for working out of the demand of Rs. 88,41,543/-, on the basis of 8% or 10% of the sale price of dutiable and exempted final products, is not maintainable. We, therefore, remand the matter to the adjudicating authority for proper verification of appellant's claim of reversal of Cenvat credit on inputs attributable to manufacture of exempted final products on the basis of appellant's records after affording opportunity to the appellant to explain their case before deciding the issue of quantum of Cenvat credit in remand proceedings." * The Hon'ble Supreme Court in the case of Bombay Dyeing & Mfg. Co. Ltd. - 2007 (215) E.L.T. 3 held in para 8 that : "8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption ....
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....to intimate the department, Rule 6(3)(i) would automatically come into application." * The Hon'ble Tribunal in the case of Cranes & Structural Engineers - 2017 (347) E.L.T. 112 (T) held in para 4.1 that : "4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing the exercise of his option. The argument 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 calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Sub-rule (3A) of Rule 6 is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other ....
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....As per our above discussion, we hold that proportionate credit paid by the appellant along with interest is sufficient compliance under Rule 6(3), accordingly the same is maintained. The demand under Rule 6(3)(i) i.e. 5%/10% of value of the exempted goods and all the penalties are set aside. The appeal is allowed in the above terms. " c) In the case of Maize products (Supra) the Hon'ble Gujarat High Court has passed the following decision: "3. The brief facts necessary for the present are that the respondent-Company manufactures certain dutiable products narrated in paragraph No. 3(a) of the impugned order of the Tribunal. In the course of manufacturing process, two inputs, namely, Caustic Soda Lye and Hydrochloric Acid are used, resulting in manufacture of both dutiable and non-dutiable products. The Revenue took a view that no duty was payable on some of the final products and hence, duty at the rate of 8% of the value of such final products was required to be paid and CENVAT credit was wrongly availed of. Four show cause notices relating to an exempted product and nine show cause notices relating to bye-products were issued, the period being from April 2000 to March ....
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....vat credit or otherwise. 6. Thus, in effect, the directions issued by the Tribunal are merely in consonance with the requirement of the relevant rule, and it is not possible to state that the Tribunal has committed any error in issuing such directions. The respondent-assessee having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal in paragraph No. 4 of the impugned order as regards reversal of the amount involved and any more amount that may be reversible, the Tribunal has issued directions accordingly. 7. In fact, the directions of the Tribunal primarily go to show that the direction was to re-determine the credit taken on common inputs and accept the offer to reverse such entire credit on common inputs insofar as they relate to demand proposed in the nine show cause notices. The Tribunal has also recorded the undertaking given by the respondent-assessee that if any further credit is to be reversed, the same shall be reversed within four weeks from the date of receipt of the communication from the Department. Hence, in the facts and circumstances of the case, it is apparent that the entire controversy has been decided by the T....
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....d as follows :- "5. The appellant has produced relevant extracts from the relevant Rule of Cenvat Credit Rules, 2002 which relates to obligation of manufacturer of dutiable and exempted products. Under sub-rule (2) of the said Rules, a manufacturer is required to maintain separate accounts regarding inputs used for manufacturing of dutiable products and inputs used for manufacturing of exempted products. However, sub-rule (3) stipulates that, in a case where the manufacturer opts not to maintain separate accounts, the manufacturer shall follow either condition (a) or condition (b), as the case may be. Under the Rule, Explanation-1 provides that the amount mentioned in any of the conditions shall be paid by the manufacturer by debiting the Cenvat credit or otherwise. 6. Thus, in effect, the directions issued by the Tribunal are merely in consonance with the requirement of the relevant rule, and it is not possible to state that the Tribunal has committed any error in issuing such directions. The respondent assessee having accepted before the Tribunal to reverse the Cenvat credit as recorded by the Tribunal in paragraph No. 4 of the impugned order as regards reversal....