Custom, Excise & Service Tax Tribunal
Indofil Chemicals Company vs Thane I on 30 September, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: E/3944/2005
[Arising out of Order-in-Appeal No: BR/204/Th-I/05 dated 29/09/2005 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone I.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Indofil Chemicals Company
Appellant
Vs
Commissioner of Central Excise
Thane I
Respondent
Appearance:
Shri B.R. Tripathi, Advocate for the appellant Shri Mr. Navneet, Addl. Commissioner (A. R.) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Date of hearing : 30/09/2013 Date of decision: 30/09/2013 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal is directed against Order-in-Appeal No: BR/204/Th-I/05 dated 29/09/2005 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone I. Vide the said order the learned appellate authority has confirmed a duty demand of ` 19,06,807/- under the provisions of Rule 57I of the Central Excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944 and also imposed equivalent amount of penalty under Rule 173Q of the said Rules.
2. The facts relevant to the case were as follows:
2.1. The appellant, M/s. Indofil Chemicals Company, Thane, is a manufacturer of chemicals falling under Chapters 28, 29, 34, 38 and 39 of the Central Excise Tariff and they were availing CENVAT credit on the inputs used in the manufacture of final products. The appellant used inputs such as Hydrogen Peroxides and Caustic Soda and took CENAT credit on the inputs used in the manufacture of the various chemicals and also on G-62 falling under Chapter 15. The product falling under Chapter 15, namely, G-62 was exempt from payment of duty vide Notification No. 2/94-CE as amended. Inasmuch as the appellant did not maintain separate records for the quantity of Hydrogen Peroxides and Caustic Soda used in the manufacture of dutiable final product and exempted final product, the department issued a show cause notice seeking reversal of the entire credit taken on the inputs i.e. Hydrogen Peroxide and Caustic Soda used in the manufacture of both, the dutiable and exempted final products under Rule 57I read with Section 11A of the Central Excise Act, 1944. The demands were confirmed along with imposition of equivalent amount of penalty. The appeal filed against the said order met with rejection; hence the appellant is before me.
3. The learned counsel for the appellant submits that they are not liable to reverse the entire credit taken and are required to reverse only the credit taken on inputs which have gone into the manufacture of exempted product, namely, G-62, whereas in the impugned notice, demand has been made for the reversal of the entire credit taken. Only in respect of show cause notice dated 17/10/1996, the authority which issued show cause notice has computed the proportionate credit attributable to the inputs contained in the exempted product. In fact, in respect of the previous notices also, the same principle could have been followed and if that is done, the total credit required to be reversed by them would be only ` 3,24,624.28 which the appellant has reversed on 13/01/2005. Accordingly, he submits that the impugned order confirming the demand of ` 19,06,807/- is unsustainable in law.
3.1. The learned counsel also submits that vide Section 69 read with Section 73 of the Finance Act, 2010 the provisions of CENVAT Credit Rules and Central Excise Rules were retrospectively amended so as to provide for reversal of credit attributable to inputs/input services contained in the exempted final product and, therefore, during the impugned period, in view of the retrospective amendment of law, the appellant was required to reverse only the proportionate credit attributable to the inputs contained in the exempted final products. Therefore, he pleads that impugned order be set aside.
4. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, submits that, inasmuch as the appellant has not maintained separate account in respect of the inputs used in the manufacture of dutiable final products as well as exempted final products, the quantum of credit attributable to inputs contained in the exempted final products needs determination which has not been done. In the show cause notice dated 17/01/1996 though the demand has been made for reversal of credit attributable to inputs contained in exempted final products, the same has been arrived at taking into account the details furnished by the appellant, and there has been no factual verification of the actual quantum of credit required to be reversed. He further submits that the appellant has only reversed the credit belatedly, but no interest liability has been discharged on such delayed reversal of credit. Finance Act, 2010 envisages reversal of credit at the time of clearance of the exempted final product and in case there is any delay in such reversal, the said Act provides for demand of interest @ 24% per annum. In the present case, the reversal made by the appellant needs to be verified and even if the same has been found to be correct, the appellant would be liable to discharge interest liability @ 24% per annum on such delayed reversal.
5. I have carefully considered the submissions made by both the sides. The demand fore reversal of the entire credit taken on Hydrogen Peroxide and Caustic Soda used in the manufacture of both dutiable and exempted products cannot be sustained in law. What the appellant is required to reverse is the CENVAT credit attributable to inputs contained in the exempted final products. Thus, the reversal done by the appellant has to be verified either based on the SION norms fixed, if any, for the products or on the basis of other technical literature. Further, as per the provisions of Finance Act, 2010, the appellant is also liable to discharge interest liability on the delayed reversal of credit. In the present case, the credit has been reversed only in 2005 whereas the credit was availed during 1995-96. Therefore, interest liability would accrue and the same has to be discharged @ 24% per annum as provided for in Finance Act, 2010.
5.1. In view of the above, the matter has to go back to the original adjudicating authority for verification of the reversal of the credit undertaken by the appellant and if the same is found to be correct, benefit has to be extended to the appellant. Further, the appellant is liable to discharge interest @ 24% per annum, in view of the retrospective amendment of law providing for proportionate reversal of credit, no penal liability can be fastened on to the appellant, and therefore, the penalty imposed on the appellant is set aside. The appellant is also directed to co-operate with the department in providing necessary data for verification of the reversal of the credit in respect of the inputs contained in the exempted final product. Since the matter pertains to the year 1995-96, the adjudicating authority is directed to dispose of the matter within a period of two months from the date of receipt of this order.
6. Thus, the appeal is allowed by way of remand.
(Dictated in Court) (P.R. Chandrasekharan) Member (Technical) */as 2