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2024 (4) TMI 816
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....lic company listed on BSE and engaged in the business of manufacture of iron & steel products & generation of power at its integrated manufacturing facility registered under erstwhile central excise laws vide registration number AAACI7189KXM001. The Appellant had a separate division as a separate manufacturing facility namely R.R. Ispat registered separately under erstwhile central excise laws vide registration number AAABCR6219CXM001. 2.1. Similarly, the Appellant had another unit, which was taken over from M/s Hira Industries Limited having its registered factory at Pandripani, Geedam Road, Jagdalpur, Distt.: Bastar (C.G.) and was registered separately under the erstwhile Central Excise law holding Central Excise Registration No. AABCH2868PST002 also rendering services under, inter-alia, Business Auxiliary Services. 2.2. All the above units availed Cenvat credit of excise duty paid on inputs & capital goods and service tax paid on input services and filed their statutory returns separately. 2.3. The other manufacturing units of Appellant i.e. RR Ispat & Hira Industries Limited were a result of merger of said companies with Appellant. The aforesaid companies have wind mil....
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.... 2.10 On scrutiny of balance sheet, the revenue noticed that Appellant has sold electricity to electricity board and has engaged in trading of goods like manganese ore, coal & imported scrap which are raw material for the Appellant at the disputed registered location and also at the other division i.e. RR Ispat. Based on the above, revenue issued instant demand notice in two parts i.e. demand of credit pertaining to sale of electricity and demand of credit pertaining to trading of goods. 2.11 Demand of credit pertaining to sale of electricity, it was the case of the revenue regarding sale of electricity that Appellant has not followed the procedure prescribed in Rule 6(3A) of the Credit Rules while making the reversal. It is admitted fact in the SCN dated 22.11.2016 that reversal is required only on common input services used in generation of electricity and manufacture of dutiable goods by the Appellant. 2.12. The SCN dated 22.11.2016 has computed the reversal of credit based on formula prescribed under Rule 6(3A) but has applied the same by considering entire turnover of the company including all divisions which have separate registrations and has similarly considered ent....
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....Appellant despite that the entire case has been made out based on the verification of ER-4 returns. 3.4 However, while considering the value of credit in computation the value of credit has been taken to be entire credit availed by the Appellant including credits pertaining exclusively to dutiable activities. The Commissioner (Appeals) further goes on to hold that adoption of entire value of credit availed is correct despite admission in the demand notice itself that demand has to be confined to common services. 3.5 He further submits that the main business of Appellant is of manufacturing dutiable iron and steel goods which as evident from the returns enclosed by the Appellant. Majority of the credit availed by appellant is on inputs and input services which are exclusively in relation to dutiable activity. The proposed computation of the lower authorities directs reversal of such credit which is exclusive for dutiable activity. The aforesaid manner of application of Rule 6(3A) is beyond the parent provision i.e. Rule 6(1) which applies only on such credit which is common to dutiable and exempted activity. That such an application is also against Rule 3(1) of the Credit Rule....
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....is liable to be set aside on this ground itself. 3.10 He further submits that it is an admitted position in the entire proceedings that demand is to be confined only to the extent of use of common input services in generation of electricity sold outside the disputed registered premises. There can be no demand on credit pertaining to services relatable exclusively to dutiable activity. Rule 6(1) to the CENVAT Credit Rules shall apply only on credits which have nexus to exempted activity. 3.11 He further submits that during the period Appellant has already reversed CENVAT credit on common input services based on directions of the revenue during various annual audits and Cost Audit by Shri Khatwani, Assistant Director, Cost. The said reversals also stand verified by the revenue during audits and agreed to be in compliance with Rule 6(3A). 3.12 This part of the OIA dated 29.08.2018 confirms demand of CENVAT credit amounting to Rs. 95,58,241/- as 6% or 10% of the sale value with a finding that appellant has been engaged in trading of goods other than its inputs. The aforesaid finding is directly contrary to the admitted facts based on which demand notice was issued and adjudica....
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....further submits that activity of Appellant is not covered under Rule 6 of the CENVAT Credit Rules and hence Appellant is not hit by the rigours of Rule 6. Consequently, neither any reversal nor any payment is required under Rule 6 of the CENVAT Credit Rules. 3.17 That it is an admitted position in instant proceedings that disputed clearances are that of coal, manganese ore & imported scrap. It is also admitted at Paragraph 9 of the show cause notice dated 22.11.2016 that aforesaid goods have been purchased by Appellant for use in manufacture of dutiable goods. Thus, it is undisputed that all the disputed goods are inputs of the Appellant which stand established from relied upon documents and statutory periodic returns filed by the Appellant. 3.18 That Appellant has sold its inputs on which credit has been availed i.e. coal/ manganese ore/ imported scrap on reversal of such credit under Rule 3(5) of the CENVAT Credit Rules. The aforesaid activity of clearance of inputs as such cannot be regarded as trading activity and such clearances are covered under Rule 3(5) of the CENVAT Credit Rules which undisputedly stands complied with by the Appellant. 3.19 He further submits that....
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.... the issue is settled in favour of the Appellant by the Tribunal in the case of CCE Vs UP Telelinks - 2015 (329) ELT 888 (Tri - Del) wherein it has been held that clearances of inputs as such will not qualify to be a trading activity. 3.25 It has been consistently held by the Courts that when Credit Rules did not separately define trading activity then also credit was not available in proportion to trading turnover as trading activity was outside the purview of Credit Rules. Such reversal was however, not under Rule 6 of the Credit Rules. Reliance is placed on the following decisions:- (i) Mercedese Benz India Pvt. Ltd. Vs CCE-2014 (36) STR 704 (Tri-Bom) (ii) Delcam Software India Pvt. Ltd Vs CCE-2016 (43) STR 103 Tri - Bom) (iii) TFL Quinn India Private Limited-2016-TIOL-856-CESTAT-HYD 3.26 During the said period also, there was no requirement of reversal of credits of input services pertaining to clearance of inputs/ capital goods treating the same to be trading. The aforesaid decisions have been relied upon by the appellant only to put forth the point that the word trading has to be given only a contextual meaning to include cases of buying and s....
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....of the revenue authorities then no charge of suppression can be leveled against the assessee. In this regard, reliance is placed on the following decisions:- • CCE Vs N.R. Agrawal Industries - 2014 (300) ELT 213 (Guj) • CCE Vs Raptakos Brett & Co. - 2006(194) ELT 101 (Tri - Mum) • CCE Vs Orion Ferro Alloys Pvt. Ltd - 2010(259) ELT 84 (Tri - Del) • CCE Vs Rajaram Maize Products - 2010 (258) ELT 539 (Tri - Del) • Final Order No. A/52257-52258/2014 - EX[DB] dated 07.05.2014 • Continental Foundation Joint Venture Vs CCE 2007 (216) ELT 177 (SC) 3.32 He further submitted that the aforesaid allegations regarding suppressions of information are factually incorrect and only forwards the case of Appellant on limitation. That Rule 6 applies only on account of common inputs & input services used in manufacture of dutiable & exempted goods. That since Appellant has been periodically reversing credit under Rule 6 and the same stands verified by the department every year during audits stands testimony to the fact that revenue was always aware of use of common input services in generation of electricity. As regards de....
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....n Welfare Coop. Society Ltd. 2006 (4) S.T.R. 213 (Tri. Del.) • Haldia Petrochemicals Ltd. v. CCE 2006 (197) E.L.T. 97 (Tri. - Del.) • Siyaram Silk Mills Ltd. v. CCE 2006 (195) E.L.T. 284 (Tri. - Mumbai) • Fibre Foils Ltd. v. CCE 2005 (190) E.L.T. 352 (Tri. - Mumbai) • ITEL Industries Pvt. Ltd. v. CCE 2004 (163) E.L.T. 219 (Tri. - Bang.) 3.36 He further submits that credit was availed on bonafide belief of admissibility of such credit as established in preceding paragraphs. It is settled law where assessee has acted under bonafide belief, penalty is not imposable. Reliance is placed on following decisions:- • CCE Vs N.R. Agrawal Industries-2014 (300) ELT 213 (Guj) • CCE Vs Raptakos Brett & Co. - 2006(194) ELT 101 (Tri - Mum) • CCE Vs Orion Ferro Alloys Pvt. Ltd- 2010(259) ELT 84 (Tri - Del) • CCE Vs Rajaram Maize Products-2010 (258) ELT 539 (Tri - Del) • Final Order No. A/52257-52258/2014-EX[DB] dated 07.05.2014 • Continental Foundation Joint Venture Vs CCE-2007 (216) ELT 177 (SC). 3.37 The present proceedings also seek to recover interest under Rul....
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....led with the profit margin, is sufficient evidence of trading. Having availed the common credit and with opting for reversal as per formula, appellant is liable to pay 6% of the value of traded goods. Further, the appellant has not proved and submitted that they have availed CENVAT credit on all traded goods. Department's submission: Burden of proof regarding admissibility and utilization of CENVAT credit on input service is upon the appellant in terms of Rule 9 (6) of the CCR. Under Self-assessment, it is duty of the assessee to correctly determine their liability and discharge with true disclosure. No declaration for clearance of electricity and trading in ER-1 return. No intimation was filed with Supdt about credit reversal in terms of clause (g) of Rule 6 (3) of CCR for correct determination of credit reversal as per formula. In terms of option exercised by the appellant, it was a bonafide belief that unit is not availing credit on common input services. Their declaration was that "No input service is specifically used for exempted trading activity". They suppressed that information that there is common input service used for trading activity. Once something i....
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.... common use of input services. The contention is that while confirming the demand, computation of the value of the electricity cleared by the appellant's Siltara unit also includes the value of the electricity cleared by their other units, namely R.R. Ispat Unit and Hira Industries. For this purpose, the ld. Counsel of the Appellant has submitted additional submissions. For the sake of brevity, the data as submitted by the learned Counsel is reproduced hereinafter; GODAWARI POWER AND ISPAT LIMITED, RAIPUR DETAILS OF POWER SOLD FOR THE PERIOD 2010-11 TO 2014-2015 Financial Year Value of Exempted Goods (M) as taken by the department Value of power sold from the Noticee's unit at Siltara, Raipur (Rs) Value of power sold from Wind Mill registered in the name of R.R. Ispat (Rs.) Value of power sold from Wind Mill registered in the name of Hira Industries (Rs.) Total 2010-11 42,10,27,665.00 39,99,72,203.00 1,76,36,429.00 34,19,033.00 42,10,27,665.00 2011-12 22,72,79,823.00 21,00,90,060.00 1,46,63,503.00 25,26,260.00 22,72,79,823.00 2012-13 20,55,50,869.00 18,31,94,088.00 1,87,66,092.00 35,90.689....
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....tant despite having many opportunities, which finds mention in the findings of the adjudicating authority, as reproduced below: "17.2 From the Range Superintendent's report, as above, it is apparent that the Notice have failed to bring any documentary evidence to prove their claim. I find that the Notice have been extended enough opportunity during the adjudication proceedings and well by the jurisdictional Range Superintendent to establish their claim that the demand in the instant SCN has been quantified taking the consolidated sale figure from the balance sheet which includes the figures in respect of RR Ispat Division & Wind Mill Division In view of this position the Notice's plea on this count is not justified and hence not acceptable. I hold that the demand of Rs.97,01,260/ - quantified in terms of Rule 6(3)(ii) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 and as proposed in the SCN is sustainable against the Notice." However, this issue whether the figures taken by the Department standalone Balance-sheet pertaining to Godawari Power and Ispat Ltd, ot not requires verification at the original stage. In view of the emphatic submissions made by the ld c....
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....aken for executing such trading. He explained the advantage to the appellant for effecting trading in the guise of inputs cleared as such will always be advantageous as they can avail credit on these traded goods as inputs until its clearances, which is a financial accommodation and further need to reverse equal amount of credit only despite use of the common input services but without reversal of the CENVAT Credit on such common input services. If these clearances are considered as trading which is an exempted service, the appellant firstly not allowed to take credit on these inputs and simultaneously was required to reverse/pay amount of the CENVAT Credit on account of used of common input services. 12. Learned Authorised Representative further submitted that the appellant has earned a substantial profit out of such trading which he arrived @ 17% in the financial year 2014-15 and similarly in other financial years as well. For this reason itself, he emphasised that such clearances cannot be considered under Rule 3(5) which is not intended to allow the trading by earn of the profit in its guise. He further explained that this would be further a wind-fall gain as appellant have ....
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....) for computers and computer peripherals: for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @ 5% for each quarter in the fourth and fifth year @ 1% (ii) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter: Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value. (b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to theduty leviable on transaction value.] [(5B) If the value of any, (i) input, or (ii) capital goods before being put to use, 25[on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then] the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods: Provid....
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....ision of Rule 3(5) further strengthened by the Larger Bench judgement of the Tribunal in the case of MODERNOVA PLASTYLES PVT. LTD.Vs. Commissioner of C.Ex., Raigarh. [2008 (232) E.L.T. 29 (Tri. - LB)]. This case is specifically on the interpretation of the expression "as such" and accordingly, the observation of the Larger Bench is as follows: "We have heard both sides on the issue referred to the Larger Bench, which relates to interpretation of the expression "as such" appearing in Rule 4(5)(a) of the Cenvat Credit Rules, 2004, which reads as under :- "The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, reconditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENV....
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.... reconditioning etc., would not be able to avail of the facility under Rule 4(5)(a). Further, if the expression "as such" is interpreted to mean new or unused capital goods, then the question of testing, repairing or reconditioning them does not arise and the terms 'testing', 'repairing' and 'reconditioning' would become redundant, and any interpretation which results in rendering any portion of rule or legislation redundant, should be avoided, as held by the Apex Court in Amrit Paper v. CCE, Ludhiana - 2006 (200) E.L.T. 365 (S.C.) and Rajesh Kumar Sharma v. UOI - 2007 (209) E.L.T. 3 (S.C.). 14.1 The ratio emerging from the aforesaid decision of the Larger Bench that "as such" is to be interpreted as commonly understood which is in the original form and without any addition, alteration or modification. The phrase 'as such' is to be interpreted to mean what is being indicated or suggested i.e. anything per se with respect to its inherent nature. Thus for anything to be 'as such', nothing should have changed whether it be appearance. Composition quantity or even the value assigned to it at the initial state. Thus, any change from the original form, whether physical or monetary, as....
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....d that "the Noticee has indulged in willful suppression of the fact of generation of income from selling electricity generated by using common input and input services and engaging in trading activity by selling of goods which were purchased and released by them for use in the manufacturing process and of Rule 6 of the Rules and the amount they were required to pay under Sub-Rule 6(3)(ii) and Rule 6 (3) (i) and had not paid the required amount with an intention and to evade payment of Central Excise duty. The Noticee has deliberately never disclosed these facts in their intimation filed under Rules 6(3A) of the Rules and also deliberately paid less amount which they are correctly liable and thus are liable to be penalized. The scrutiny of their Annual Financial information statement in form ER-4 filed by them revealed the separation of the above facts by them of deliberately evading the payment of said amount on sale be exempted goods viz electricity and providing exempted services viz trading of goods, which is recoverable from them under Rule 14 of the Rules read with Section 11A of the Act, along with interest at the appropriate rate under Rule 14 of the Rules read with Section ....
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....sed common input services for the electricity as well as trading to the goods, which is not disputed by the appellant. 19.2 The Learned Authorised Representative submitted that having filed the option under Rule 6(3A), the statutory requirement to file intimation to the jurisdictional Superintendent of Central Excise within a period of 15 days from the date of payment or adjustment as per provisions of clauses (g) of Rule 6 (3A) was not filed by the appellant. It was a mandatory intimation which reveals to the officer about the details of the CENVAT Credit availed and reverse in the prescribed manner. The provisions of this clauses (g) of Rule 6 (3A) is re-produced below :- (g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:- (i) details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributab....
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....rned counsel of the appellant that they were subjected to the audits earlier may not immune them as they have not provided any evidence of the disclosures to the audits earlier which render them to prove that department ignored certain facts despite being bought to the notice. Audit is always a selective audit and non-pointing out of any lapse by audit depend upon the many factors like disclosure of the information to the audit, submission of the concerned record before the audit, thorough disclosure of the activity before the audit etc. Non pointing out during audit cannot be a ground to declare it to be non-suppression. 21. As regards the contention of the learned Counsel that they have succeeded in proceeding under the order of the Tribunal dt. 14.01.2016 for reversal of the Credit attributable to the electricity cleared outside is no more applicable under consideration that the assessee himself opted to reverse the Credit under Rule 6(3A) instead of following same in the way held by the Tribunal. 22. Having opted for reversal under Rule 6(3A), it was bonafide belief of the department that the assessee ought to be reversing the CENVAT Credit for the exempted goods and exem....
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.... specifying the details in various declarations led to issuance of SCN and invocation of extended period of the limitation. 26. The Hon'ble Supreme Court in Mercantile Company Vs. Commissioner of Central Excise, Calcutta [2007 (2017) E.L.T. 330] upheld the extended period for the reason that the letter sent by appellant to department does not disclose the entire fact and actual activity under taken and thus department did not have full knowledge of activities. 27. It is settled principle in law that existence of ingredients leading to invocation of extended period of limitation is a "question of the fact" and the facts of the case in hand will determine whether the extended period of limitation could have been invoked, unlike the "question of law" where the determination can be made on the basis of the available judicial precedents. 28. We also place reliance on the following decisions wherein various courts and Tribunal has held in invocation of extended period of limitation in similar circumstances. In case of Neminath Fabrics [2010 (256) E.L.T. 369 (Guj.)], Hon'ble Gujarat High Court has held as follows: "16. The termini from which the period of "one year" or "....
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....viso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of Section 11A would be applicable. However such reasoning appears to be fallacious inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularities the suppression would not be obliterated." 29. In case of Usha Rectifier [2011 (263) E.L.T. 655 (S.C.)], Hon'ble Supreme Court observed as follows: "12. Submission was also made regarding use of the ex....
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....ussion, we are of the considered view that the appellant succeeded in suppressing critical information from scrutiny. Hence the extended period is rightly invokable in the case. 32. Since it is established, that appellant had suppressed the material facts and misstated with intent to evade payment of amount of Cenvat credit, the penalty under Section 11AC shall be natural consequence as has been held by Hon'ble Supreme Court in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)]. The Apex court held the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. 33. The interest liability for delayed payment of amount of CENVAT credit also cannot be disputed. Appellant has not paid the amount, payable by them as per admitted position under Rule 6 (3A) on the exempted goods cleared by them by the due date and hence demand of interest on the delayed payment is justified. Hon'ble Bombay High ....