TaxTMI 
TaxTMI 
2024 (5) TMI 410
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.... and Seventeen Only] upon the party under Rule 15 of the CENVAT Credit Rules, 2004." 2.1 Appellant is engaged in the manufacture and clearance of dutiable articles of glass i.e Glass Table ware/Kitchen ware CSH- 70133900,Glass Jars CSH- 70109000 as well as exempted goods ( mouth-blown glass) i.e. glassware- CSH- 70133900, glass chimneys for lamps and lanterns- CSH 70200021 and Glass Bangles CSH-70181010 of the Central Excise Tariff Act,1985. 2.2 Acting on an intelligence that the party had suppressed the production and clearances of exempted goods and had been deliberately contravening the provisions of Rule 6 of the Cenvat Credit Rules, 2004 with intent to evade payment of the amount as prescribed under the Rules, a team of the Preventive Officers of the Central Excise Division, Agra, visited the factory premises of the party on 11.12.2009. 2.3 The party was paying the Central Excise duty on goods produced by the automatic process and was availing exemption from the payment of the excise duty on the glassware namely glass chimneys & glass ware and Bangles, which were being produced by mouth blown process in terms of General Exemption No.52-B, Sr. No.16 of Notification No.....
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....edit Rules, 2004 laid down certain mandatory requirements on the part of manufacturers. Rule 6(2) of the Cenvat Credit Rules, 2004 prior to its amendment with effect from 01.04.2008, states that a manufacturer of dutiable as well exempted finished goods has to maintain separate record of receipt, consumption and inventory for input/ input services consumed. Similar provisions have been made in the amended provisions of Rule 6(2) and Rule (3) of the Cenvat Credit Rules, 2004 which has been amended w.e.f. 01.4.2008. 2.7 The departmental was of the view that as per provisions of sub-rule (1) of Rule 6 of the Cenvat Credit Rules, 2004, the Cenvat credit is not allowed on such quantity of material (input)/ input service which were used in exempted goods and as per sub-rule (2) of Rule 6 of Cenvat Credit Rules, 2004 the manufacturer or provider of the output services has to maintain the separate of inventory of the input and input services. The intention of rule is very clear which implied that no quantity of input/ raw material on which Cenvat credit was taken should be used in the manufacture of the exempted goods, but in the instant case the party failed to do so. 2.8 In the ins....
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.... • Tata Steel Ltd. [2020 (7) TMI 698-CESTAT-Kolkata] • Till December 2007 appellant used two furnaces, one for the manufacture of dutiable goods and other one for the manufacture of exempted finished goods. They were duly maintaining the separate records of the raw material used for dutiable and exempted goods. The said records are annexed as Annexure 5 in Volume II of the Paper book. • Rule 6 does not require a manufacturer to carry out the manufacturing process on entirely different machines, furnaces etc., had this been the case then the purpose of manufacturing both types of products in a single unit, as contained in Rule 6 would largely be frustrated when all the processes have to be carried out separately. • Demand is barred by limitation. Extended period of limitation as per Section 11 A has not been invoked in the present case while making this demand. 3.3 Arguing for the revenue learned authorized representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records find....
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....ment in Sub Rule 3 was inserted by notification number 10/2008 C.E (N.T.) dated 01/03/2008. The revised Rule is reproduced as below: Rule 6(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 total price of the exempted goods and the provider of output service shall pay an amount equal to six per cent, of total price 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 atributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specified in sub-rule (3A). Explanation I. - if the manufacturer of goods or the 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,....
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....xt that said chemicals have been used for the manufacture of exempted final product; and in this way, they had complied with the provisions of Rule 6(2) of the Cenvat Credit Rules 2004. The party has also contended that they have two furnaces operating before 31.12.2007, one exclusively for dutiable product and another for exempted goods. Though from 01.01.2008 they have operated one furnace and maintaining records of exempted and dutiable goods separately. On going through the records resumed and defence submitted, I find that they failed to prove their claim, in as much as they have not submitted any evidence, documentary or otherwise to establish that separate goods were produced from the two furnaces. They accepted that during the course of manufacture, certain broken glass was generated, which was recycled within the factory itself, and such broken glass enjoyed duty exemption under /26 Notfn. No. 67/95 CE dated 16.3.1995 (as amended) whereas no record of broken glass or bhanger was maintained by them. I have also gone through the case records, wherein I observe that the inputs viz. Soda Ash and other chemicals used in both the categories of the final product....
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....g through the RG-1 register, it was observed that only quantity of tableware/kitchenware has been reflected, and there is no mention of the account of wastage in the same. Although the wastage was being recycled, yet the same is classifiable under Chapter 70 of Central Excise Tariff Act, 1985, and is otherwise dutiable. I find that w.e.f. 01.04.2008, substantial changes have been made in the provisions of Cenvat Credit Rules, 2004 and I have also gone through the amended provisions of the law, wherein a detail procedure has been laid down for calculation and reversal of amount on account of proportionate basis w.e.f. 01.04.2008. The procedure as per sub-rule 3(A) of Rule 6, is as under: "(3A) For determination and payment of amount payable under clause (i) of sub-rule (3), the manufacturer of goods or the provider of output serwice 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:- (b) the manufacturer of goods or the provider of output....
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....condition prescribed in this regard, and the exercise of making separate records of receipt and consumption becomes futile, in the facts and circumstances of this case. In the light of above facts, I hold that the party is liable to pay the 'amount' equal to ten percent of the total price, excluding sales tax and other taxes, if any, paid on such goods, as envisaged in Rule 6(3)(b) ibid. This view also finds support from the various citations relied upon by the department while framing the allegations against the party. In the case of Commissioner of C. Ex. Thane-l V/s M/s Nicholas Piramal (India) Ltd. [2009(244) E.L.T.321(Bom.)], the Hon'ble High Court, Mumbai has held that:- ..... I further observe that the party has contested that there is no justification for demanding any amount on the value of exempted goods in excess of the Cenvat credit attributable to inputs used in or in relation to manufacture of dutiable/exempted goods. In this regard they submitted that an amount of Rs3,03,68,017/- has been demanded which is even higher to the total credit of Rs. 2,54,69,932/- taken by them during the relevant period The party has also contended that recovery....
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....ods i.e. dutiable as well as exempted. 4.4 Similar issue has been considered by the this bench in case of Geeta Glass Works and vide Final Order No A/71757-71760/2017-EX 9DB) dated 28.11.20017 following has been held: "3. Revenue initiated proceedings against the assessee for confirmation of 5%/10% of the value of the exempted final products in terms of provisions of Rule 6 93) of the CENVAT Credit Rules on the ground that they have availed cenvat credit in respect of common inputs used for manufacture of dutiable as also exempted final products. The appellant during the course of adjudication, took a categorical stand before the adjudicating authority that in respect of Cenvatable inputs they have maintained separate records, thus, the question of invocation of the provisions of Rule 6 (3) does not arise. 4. The said plea of the appellant stands rejected by the adjudicating authority on the ground that no such separate records were being maintained in respect of non cenvatable inputs as also on the ground that inputs were not being stored separately. The adjudicating authority also took an objection to the fact that the furnace used fr both type of th....
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....y for the period April 2004 to March 2008 being covered under Rule 6 (7) of the Cenvat Credit Rules and confirmed the demand and recovery amounting to Rs. 1,26,19,534 along with interest for the period April 2008 to June 2009, which is bad in law. Appellant having reversed entire amount of Cenvat Credit availed on common input services related to SIAPTON, the demand is not sustainable. He placed reliance on the following judgments:- (i) Welspun Corporation Ltd. vs. CCE - 2019(368)ELT 179(Tri.) (ii) Star Agriwarehousing& Collateral Management Ltd. vs. CCE - 2021 (44) GSTL271 ((Tri.) (iii) Ahemdnagar District Central C-op Bank Ltd. vs. CST - 2018(364)ELT 1098 (Tri.) (iv) Reliance Life Insurance Co. Ltd. Vs. CST -2018(363)ELT 1050 (Tri.) 5. On the other hand, Shri Ganasyam Soni, Additional Commissioner (AR) reiterated the findings in the impugned order. 6. We have heard both the sides and perused the records. We noticed that in the present matter Ld. Commissioner confirmed the demand for the period April 2008 to June 2009 on the ground that the Appellant has availed the Service tax credit on Common input services used in the exempt....
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.... present matter Ld. Commissioner allowed the benefit to the appellant only pertaining to the period September 2004 to March 2008 and dropped the demand as per the above retrospective inserted sub-rule (7) of Rule 6 of Cenvat Credit Rules, 2004 but confirmed the demand for the period April 2008 to June 2009 on the ground that this period is not covered under the retrospective amendment. 7. We find that the case of the department is that since the assessee has availed the Cenvat credit in respect of common input service used in the manufacture of dutiable and exempted goods, the appellant is required to pay 10%of the value of the goods cleared without payment of duty (exempted goods). From the facts it is undisputed that the appellant have been reversing Cenvat credit proportionate to the credit on input service used for exempted goods along with interest, therefore, first the credit though availed at the time of receipt of input service but after reversal thereof along with interest the position is as if credit was not availed. We are also of the view that Rule6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the ....
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....ds. In other words, the appellant reversed the entire credit taken along with interest thereon. Therefore, Rule 6(3)(i) will not have any application, when a credit is taken wrongly and the same is reversed along with interest as it tantamounts to nontaking of the credit. The Hon'ble High Court of Allahabad in the Hello Minerals. Water (P) Ltd. case cited supra clearly held that "reversal of Modvat credit amounts to non-taking of credit on the inputs and even if such reversal was done after the clearance of the goods the said action amounts to non-availment of credit. The Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd. (supra) also held that reversal of Modvat Credit at the time of clearance of the goods amounts to non-availing of credit. All the judgments relied upon by the appellant also confirm the above position. The Hon'ble High Court of Karnataka in the case of Himalaya Drug Company held that the provisions of Rule 6(3)(i) of the Credit Rule, 2004 would not be attracted if reversal of credit is done in respect of inputs used in the manufacture of exempted final products. In view of these decisions, we are of the considered view that the reversal of credit b....
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....sioner of Central Excise, Guntur [2009 (247) E.L.T. 209 (Tri.-Bang.)], this amendment being procedural, is held to be retrospective in operation. Further, the Finance Act, 2010 has retrospectively amended Rule 6 of the CENVAT Credit Rules, whereby reversal/payment of proportionate credit attributable to inputs used in the manufacture of exempted goods, either before or after the clearance of such goods is an option available to a manufacturer not maintaining separate records for receipt, consumption and use of common inputs, taking credit on common inputs used for manufacture of dutiable and exempted final products. 4. The reversal of credit for the month of Mar. '08 is, therefore, required to be verified on the basis of the formula provided under Rule 6(3A). For this purpose, we set aside the impugned order and remit the case to the adjudicating authority for carrying out the above verification. He shall pass fresh orders after extending a reasonable opportunity to the assessees of being heard in their defence. 5. The appeal is thus allowed by way of remand." • In the case of Star Agriwarehousing & Collateral Management (supra) it was held as u....
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....ssue in case of M/s. The Oberoi Raj vilas v. Commissioner of Central Excise, Jaipur reported under 2018 (5) TMI 1715 -CESTAT New Delhi, the relevant extract of same are reproduced here below :- "9. From the above, we note that the appellant has followed the proportionate method for availment of credit on common input services. It cannot be said that the appellant has availed any credit on input services used in providing exempted service. The reversal of credit as above satisfies the requirement of non availment of credit laid down in the Notification No. 1/2006-S.T. ibid. 10. It is a settled position of law that proportionate reversal at a later date will satisfy the requirement of non-availment of Cenvat credit. This view is supported by various decisions of the Supreme Court/High Courts and Tribunal, some of which have been cited by the appellant. 11. The procedure prescribed in Rule 6(3A) of the [Cenvat] Credit Rules is only to make the provisions of Rule 3 workable. By means of proportionate reversal the requirement of Rule 6(3) has been substantially satisfied. This is also provided in Rule 6(3D) of the Cenvat Credit Rules which was introduced at a ....
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....duty free copper wires. 5. The case of the Excise Department is that the reversal of credit entries are not permitted by the rules. The assessee is not entitled to remove the copper wires without payment of duty since credit of the duty paid on the inputs used in the manufacture of copper wire had already been taken in accordance with Rule 57A. Once appropriate entries have been made in the register, there is no rule under which the process could be reversed. Since the credit has been taken for the duty paid on the inputs in the ledger maintained by the assessees, the assessee cannot be heard to say that no credit of the duty has been taken by it under Rule 57A. 6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty ha....
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....rol) Appellate Tribunal dated 17th May, 1995 is set aside. There will be no order as to costs. • In the case of Welspun Corp. Ltd. this Tribunal has passed following decision: "6. We have carefully considered the submissions made by both the sides and perused the records. The limited issue to be decided by us is that in a case where at the time of receipt of input services, the appellant availed Cenvat credit on the entire service and on pointing out by the audit party they reversed the Cenvat credit 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 Rule....
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....fore 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 original adjudicating authority to verify whether the amount of Cenvat credit already reversed along with interest satisfies the requirement of 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 : ....
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....xemption 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 fabrics arose on satisfaction of the said two conditions. In this case, payment of 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 ra....
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....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 held in the judgment cited supra that the 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 onl....
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....e 6(3A) alongwith interest following the option available under Rule 6(3)(ii). Provisions for payment of 5% of the sale value of exempted goods is provided as one of the option given in Rule 6(3) of Cenvat credit Rules which is reproduced below :- ... Ld. Adjudicating Authority demanded 5% of the total sale of the trading turnover of goods on the ground that option provided under Rule 6(3)(i) is applicable on the ground that claim of the appellant on the option provided under Rule 6(3)(ii) is not available for the reason that appellant has not complied with condition provided under sub Rule (3A) of Rule 6 which provides that manufacturers of the goods shall follow certain procedure and conditions as provided under sub-rule (3A)(a)(i) to (iv) inasmuch as the appellant have not given said information in writing to the Jurisdictional Superintendent of Central Excise. Secondly the appellant, as provided under Claus (b) of sub-rule (3A) have not paid the amount of Cenvat on monthly basis and paid after almost 11 months. 5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided :- (i) Payment of 5% on value of exempte....
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.... assessee should pay the said amount, which has been complied by the appellant. 5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the compliance as provided under Clause (a) of sub-rule (3A) of Rule 6 the appellant while exercising this option is required to intimate in writing to the Jurisdictional Superintendent, Central Excise, 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. As per the submission of the appellant and perusal of their letter along with enclosed details, it is found that more or less all these particulars were intimated to the Jurisdictional Superintendent. The appellant has been filing their returns regularly on monthly ....
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.... 494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub-rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. 5.5 As discussed above and in the facts of the case that actual Cenvat credit attributed to th....