TaxTMI 
TaxTMI 
2023 (8) TMI 1135
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....d 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 dropped the demand on ground of time bar. Consideration the fact that there was audit from time to tim....
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....y 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 dutiable goods was Rs.7,14,06,692/- involving central excise duty of Rs. 88,24,098/- and the value for inputs consumed for....
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....mand 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 pointed out in the aforementioned decision, if according to the adjudicating authority, the assessee did not abide by the provisions of Rule 6(3) ....
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.... 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 manufacturer of goods or the provider of output service shall pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the ....
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....ed 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 any finding as to whether the reversal already made satisfies the test of proportionate reversal in terms of quantum of reversal. Hence, we are of the considered opinion that the matter is to be remanded to the origin....
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...., 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 on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming Cenvat credit before claiming exemption. The question of exemption from payment of duty on grey fabri....
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....e 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 option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in the judgments cited supra. It has been....
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.... 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 2004. The four show cause notices were dropped by the Commissioner himself, while in case of nine show cause notices, the proposal to levy duty was confirmed. The matter was carried in appeal before the Tribunal. 4. After hearing the parties, the Tribunal has issued the following directions.....
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....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 Tribunal by merely remitting the matter back to the Adjudicating Authority to re-determine the credit in accordance with law. If any reversal has been made by the respondent-assessee, the same is subject to verification and adjustment if ultimately any further amount is found reversible. 8. According to the respondent-assessee....