Custom, Excise & Service Tax Tribunal
M/S Beml Limited vs Commissioner Of Central Excise, ... on 22 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/27370/2013-DB [Arising out of Order-in-Original No. 31/2013 dated 30.04.2013, passed by Commissioner of Central Excise, Bangalore-1 Commissionerate, Bangalore] For approval and signature: 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 the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 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 M/s BEML Limited BEML Nagar, KGF 563 115. Appellant(s) Versus Commissioner of Central Excise, Bangalore-1 Commissionerate, C. R. BUILDING, Queens Road, Bangalore 560001. Respondent(s)
Appearance:
Mr. G. Shivadass, Advocate For the appellant Mr. Mohd. Yusuf, A.R. For the Respondent Date of Hearing: 27/06/2016 Date of Decision: 22/07/2016 CORAM :
SHRI S.S. GARG, HONBLE JUDICIAL MEMBER SHRI ASHOK K. ARYA, HONBLE TECHNICAL FINAL ORDER No. 20568/2016 PER ASHOK K. ARYA
1. The appellant namely, BEML Limited is before this Tribunal in appeal against the Order-in-Original No. 31/2013 dated 30.4.2013 passed by the Commissioner of Central Excise, Bangalore-I Commissionerate, Bangalore.
2. The Commissioner in the impugned order dated 30.4.2013, has held that Rs. 49,71,88,770/- is recoverable from the appellant under Rule 14 of Cenvat Credit Rules, 2004, read with provisions of Section 11A of Central Exercise Act, 1944, along with interest under Sections 11AB/11AA of Central Excise Act, 1944. A penalty of Rs. 49,71,88,770/- has also been imposed on the appellant under Sections 11AC/11AC(1)(a) of C.E. Act read with Rule 15(2) of Cenvat Credit Rules, 2004. The Commissioner in the impugned order also held that demand of Rs. 1,93,60,400/- being amount payable @ 10% / 5% of the value of the exempted goods cleared under Notification Nos. 10/97-C.E. dated 1.3.1997, 6/2006-C.E. dated 1.3.2006 and 12/2012-C.E. dated 17.3.2012, is not recoverable from the assessees and, accordingly, dropped the said demand. The Commissioner in the impugned order also appropriated an amount of Rs. 5,18,94,953/-, which was paid / reversed by the appellant in their Cenvat credit account during the period September 2007 to June 2012.
3. The appellant has been represented by the learned advocate, Shri G. Shivadass. The appellant in their appeal and the learned advocate for the appellant, Shri G. Shivadass inter-alia argued as follows :
(A) Demand of Rs. 13,78,91,547/-
(i) The appellant for the period prior to March, 2008 has reversed an amount of Rs.1,03,82,529/- towards the proportionate credit.
(ii) The goods in question are cleared under Notification No. 63/1995-CE dated 16.3.1995, which is covered under Rule 6(3)(a)(vii). The provision provides that the assessees shall pay proportionate credit on inputs and input services.
(iii) Rule 6(3)(b) provides for payment of 10% of the price of exempted goods other than the goods described in Rule 6(3)(a). Therefore, Rule 6(3)(b) is not applicable to the goods cleared under Notification No. 63/1995-CE.
(iv) Assuming that the amount of credit reversed does not include proportionate credit on input services, the demand if any, should be restricted to proportionate credit on input services. Reliance is placed on C.B.E.&C. Circular No. 645/45/2002-CX, dated 19-8-2002.
(v) In terms of Section 73 of the Finance Act, 2010, for the period prior to March, 2008, the appellant is required to pay only an amount equal to the credit availed on the inputs and input services used in the manufacture of exempted final products.
(vi) In any case, the demand is barred by limitation.
(B). Demand of Rs. 35,88,72,223/-
(i) The period involved is from April 2008 to June 2012. The appellant for the period April, 2008 to June, 2012 has reversed an amount of Rs.4,15,12,424/-.
(ii) It is undisputed that the proportionate credit of inputs has been reversed by the appellant, which implies that the appellant has exercised the option under Section 6(3)(ii). Therefore, the option under 6(3)(i) cannot be forced upon the appellant.
(iii) Further, for the period from 01.04.2011, Rule 6(3)(iii) provides for the option for maintaining separate account for inputs and reversing proportionate credit of input services.
(iv) Therefore, demand, if any, should be limited to the proportionate credit on input services. It is also submitted that during a subsequent audit, it was pointed out that the appellant has to reverse proportionate credit on input services and accordingly, the appellant has reversed Cenvat Credit on input services for the period from 2010-11, 2011-12, 2012-13. Proof of reversal of the Cenvat Credit has been produced.
(v) Ground that the amount reversed is not in terms of Rule 6(3A) was not set up in the Show-cause notice.
(vi) The demand for the period prior to July, 2011 is barred by limitation.
(C). Demand of Rs. 4,25,000/- towards the clearances for the period August 2009 :
(i) The appellant for the period August, 2009 has reversed the proportionate credit. For the reasons stated above, the appellant submits that the demand, if any, is to be restricted to the proportionate credit on input services.
(ii) In any case, the demand is barred by limitation.
3.1. The learned advocate for the appellant further submitted as follows :
(i) The appellant has maintained separate accounts in respect of exclusive inputs used in the manufacture of exempted final products and not availed credit on the same.
(ii) The appellant has availed credit on certain common inputs and input services used in the manufacture of exempted final products and reversed the proportionate credit.
(iii) The demand for the period prior to 30.03.2008 is covered by the retrospective amendment in terms of Section 73 of the Finance Act, 2010.
(iv) The appropriation of proportionate reversal of credit in the impugned order amounts to acceptance of reversal of proportionate credit and hence, the question of demand @ 10% / 5% of the value of clearances of exempted final products in terms of Rule 6(3) of the CCR, 2004 does not arise.
(v) Reliance is placed on the following decisions:
Mercedes Benz Pvt. Ltd. v. CCE, Pune-2015 (40) STR 381 (Tri-Mum.) CCE vs. Himalaya Drugs - 2011 (271) E.L.T. 350 (Kar.) CCE, Salem v. Burn Standard Co. Ltd.-2013 (295) ELT 671 (Mad.) CCE v. Bombay Dyeing & Mfg Co Ltd - 2007 (215) ELT 3 (SC) CCE, Ahd v. Maize Products-2009 (234) ELT 431
(vi) The demand for the period prior to June, 2011 is also barred by limitation for the following reasons:
(a) The Department had conducted audit from time to time and did not raise any objections with regard to the reversal of proportionate credit on common inputs and input services gone into the manufacture of exempted final products;
(b) The appellant has intimated the Department through the monthly ER-1 Returns by clearly indicating the clearance of goods under exemption notifications and reversal of proportionate credit in terms of Rule 6 of CCR;
(c) The provisions of Rule 6 of the Cenvat Credit Rules, 2004 have undergone tremendous change during the relevant period and the department itself was not very clear on the exact legal position. Reliance is placed on the decision of the Tribunal in CCE., Chennai vs. Gayatrishakti Paper & Boards Ltd. - 2013 (294) ELT 260 (Tri.-Ahmd.)
(vii) If according to the Commissioner, there is no evidence of reversal of input services, the demand at the most can be restricted to the quantity of input services attributable to the exempted clearances.
(viii) For the period after June, 2012, the appellant has reversed the proportionate credit of input service in 2013 itself, pursuant to the audit conducted by the Department.
4. Revenue has been represented by learned A.R., Shri Mohd. Yusuf, who has reiterated the findings given in the impugned order. The Revenues submissions are inter-alia as follows :
(i) The appellant has availed the credit on various inputs and input services used in the manufacture of dutiable and exempted final products and has neither maintained separate accounts nor paid an amount equal to 5%/10% on the value of clearances of exempted final products in terms of Rule 6(3)(i) of the Cenvat Credit Rules, 2004.
(ii) The appellant has not produced any documents to show that they have paid/reversed the proportionate credit availed on the inputs and input services during the relevant period.
(iii) Rule 6(3A) of the Cenvat Credit Rules, 2004 provides an option to the manufacturer either to pay an amount equal to 10% / 5% of the value of exempted final products or to pay an amount equivalent to the Cenvat credit attributable to the inputs and input services used in the manufacture of exempted final products subject to the conditions and procedures specified therein and the appellant has neither exercised any such option nor followed the procedure prescribed under the provisions of Rule 6(3A) of the CCR, 2004.
(iv) The appellant has deliberately suppressed the facts from the Department with intent to avail irregular credit.
5. We have carefully considered the facts on record and the submissions of both the sides.
6. We find that the total demand against the appeal is in three parts. These three parts are as follows :
(A). The first part of the demand confirmed is Rs. 13,78,91,547/- for the period upto March, 2008 on clearance made under Notification No. 63/1995-C.E. dated 16.3.1995 as amended.
(B). The second part of the demand confirmed is Rs. 35,88,72,223/- with reference to clearance of the goods made during the period from April 2008 to June 2012, under Notification No. 63/1995-C.E. dated 16.3.1995 as amended.
(C). The third part of the demand confirmed is Rs. 4,25,000/- with reference to the clearance of Dozers/Excavators during November 2007 and during August 2009 claiming exemption under Notification No. 10/97-C.E. The goods cleared during November 2007 have been valued at Rs. 18,75,000/- and goods cleared during August 2009 have been valued at Rs. 85,00,000/-.
7. We are taking up for discussion and decision these demands as per above three parts.
7A. Demand of Rs. 13,78,91,547/- : In this regard, the impugned order in its Para 15.1 on page 10-11 inter-alia holds/observes as under :
. The assessees were required to pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of goods, which are cleared under notification No. 63/95-CE, upto the period 31.03.2008. The assessees have stated in their reply that they have made proportionate reversal of Cenvat credit on the inputs used in the manufacture of goods cleared under Notification No. 63/95-CE, at the time of clearance from the factory. However, the assessees have not submitted any documents or evidences to show that they have paid Cenvat credit attributable to the Cenvat availed inputs and input services, during the relevant period. From their submissions, it appears that they have paid proportionate credit relating to only inputs but no input services, whereas provisions of Rule 6(3)(a)(vii) of Cenvat Credit Rules, 2004 requires payment of amount equal to Cenvat credit attributable to input services also. Further, in their additional submissions dated 12.03.2013, they have enclosed a sample calculation sheet showing proportionate reversal of cenvat credit on inputs contained in final products cleared to Defence during September 2011. On perusal of the same, it is seen that the assessees have not paid an amount equivalent to the Cenvat credit attributable to input services used in, or in relation to the manufacture of exempted goods. Therefore, I hold that the assessees have not complied with the conditions of Rule 6(3)(a)(vii) of Cenvat Credit Rules, 2004 and hence are required to pay an amount equal to ten percent of the price of exempted goods, as required under Rule 6(3)(b) of CCR, 2004, as demanded in the show cause notice dated 17.08.2012. The value of exempted goods cleared during the period upto 31.03.2008 under Notification No. 63/95-CE is Rs. 137,89,15472/- and the amount payable under Rule 6(3) of CCR, 2004 works out to Rs. 13,78,91,547/-. 7A.1 In this regard, the appellant has argued that they have reversed an amount of Rs. 1,03,82,529/- towards the proportionate credit. The appellant further argued that the goods were cleared under Notification No. 63/95-C.E., which has been covered under Rule 6(3)(a)(vii). The appellant states that the provisions of Rule 6(3) mentions that if the exempted goods are covered under Rule 6(3)(a)(vii) (which mentions the clearance of goods made under Notification No. 63/95-CE dated 16.3.1995), the assessee shall pay proportionate credit on inputs and inputs services. In order to make the matter more clear, we reproduce below the relevant provisions of Rule 6(3) of Cenvat Credit Rules, 2004, as prevalent during the period 2007 2008, which is the relevant period :
RULE 6 . Obligation of manufacture of dutiable and exempted goods and provider of taxable and exempted services. . .. ..
(3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely :-
(a) If the exempted goods are
(i) ...
(ii) .
(iii) .
(iv) .
(v) .
(vi) .
(vii) goods supplied to defence personnel or for defence projects or to the Ministry of Defence for official purposes, under any of the following notifications of the Government of India in the Ministry of Finance (Department of Revenue), namely :-
(1)
(2)
(3) No. 63/65-Central Excise, dated the 16th March 1995, G.S.R. 255 (E), dated the 16th March, 1995;
(4) (viii) (ix) ... .
the manufacturer shall pay an amount equivalent to the Cenvat credit attributable to inputs and input services used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory, or
(b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten per cent of the total price, excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; 7A.1.1 The appellant, here argues that when they have paid proportionate credit on input/input services, the provisions of Rule 6(3)(b) asking for payment of an amount equal to 10% of the total price, excluding sales tax and other taxes, will not be applicable.
7A.1.2 The appellant states that there is no dispute regarding reversal of proportionate credit on the input goods; at the most, if there is any doubt regarding the proportionate reversal of credit on input services, the demand has to be restricted only to the proportionate credit on input services.
7A.1.3 The appellant also argues that this demand is barred by limitation as there has not been any malafide intention on the part of the appellant for non-payment and non-reversal of the said demand of Cenvat credit.
7A.2 After careful consideration of the above facts and the submissions of the Department and the appellant, it is clear that this demand could theoretically be restricted only to the proportionate credit availed by the appellant on input services utilized for the goods cleared under exemption Notification No. 63/95-CE dated 16.3.1995 during the relevant period. However, we find that relevant period for the demand is from 1.9.2007 to 31.3.2008 and the Show-cause notice for the demand has been issued by the Revenue on 17.8.2012. Thus there has been a gap of more than four years, whereas normal period for demanding any short payment of duty, etc. is one year unless the Department could prove the following against the assessee :
Fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of laws and rules concerning Central Excise/Service Tax, with intention to evade payment of duty.
7A.2.1 We find on record that the Revenue has failed to prove any fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of law and rules concerning Central Excise and/or Service Tax with an intention to evade payment of duty on the part of the appellant. Consequently, the demand is barred by limitation and, therefore, the demand is hereby set aside as time barred.
7B. Demand of Rs. 35,88,72,723/- : Period involved in this demand is from April 2008 to June 2012, where the goods have been cleared under Notification No. 63/1995-CE dated 16.3.1995. The Revenue has mainly argued that the appellant did not produce any documents for proportionate payment / reversal of the amount equal to the credit availed on input services. The Revenue also says that the appellant did not either exercise the option or followed the procedure prescribed under the provisions of Rule 6(3) of Cenvat Credit Rules, 2004.
7B.1 In this regard, the appellant has argued that for this period, they reversed an amount of Rs. 4,15,12,424/-. The appellant says that when they have undisputedly reversed the proportionate credit of inputs/input services, it implies that the appellant has exercised the option provided under Rule 6(3)(ii) of Cenvat Credit Rules, 2004; and, therefore, they cannot be forced upon to exercise the option under Rule 6(3)(i) of Cenvat Credit Rules, 2004, wherein an assessee has to pay 10% of value of exempted goods as duty. The appellant-assessee also submits that for the period from 1.4.2011 Rule 6(3)(iii) of Cenvat Credit Rules, 2004 (as prevalent during that period) provides the option for maintaining separate account for inputs and for reversal of proportionate credit of input services. The appellant states that they have reversed the Cenvat credit of input services for the period of 2010-11, 2011-12, 2012-13 and it is claimed by the appellant that proof of such reversal of Cenvat credit has been produced. The appellant further argues that the demand for the period prior to July 2011 is barred by limitation.
7B.2 After careful consideration of the facts on record and the submissions of both the sides, we find that though the appellant claims that they reversed Cenvat credit on account of input services, the Revenue has not got such proof of reversal of Cenvat credit on input services. It is, therefore, held that in order to get the benefit on the subject payment/reversal of credit, a clear cut proof evidencing reversal of Cenvat credit of inputs has to be produced by the appellant before the Revenue. In case of this demand , we find that the plea of time-bar, where-under the appellant says that the demand for the period prior to July 2011 is barred by limitation is a valid argument as there has not been any clear cut proof available to substantiate any kind of fraud or collusion or any willful mis-statement or suppression of facts or contravention of any provisions of laws concerning Central Excise and/or Service Tax with an intention to evade payment of duty on the part of the appellant for recovery of any short levy or short payment of duty for the period of five years from the relevant date. Here, the Show-cause notice has been issued on 17.8.2012. Therefore, any demand for the period prior to July 2011 is clearly barred by limitation as per the provisions of Section 11A(4) of Central Excise Act, 1944. Consequently, it is held that the Revenue can recover the demand only for the normal period of one year from the relevant date. During this normal period of one year, the demand would be restricted to reversal of the proportionate credit of input services.
7C. Demand of Rs. 4,25,000/- : As per the impugned order, the period involved is the months of November 2007 and August 2009, where the goods were cleared under exemption Notification No. 10/1997-C.E. 7C.1 Here, we find that the Revenues contention is that the appellant did not produce any documents showing proportionate credit or reversal of amount equal to the credit availed on input services. The Revenue also argues that the appellant neither exercised any option nor followed the procedure prescribed under Rule 6(3)(a) of Cenvat Credit Rules, 2004.
7C.2 The appellant argues that they reversed the proportionate credit. The appellant also argues that the demand can, at the most, be restricted to the proportionate credit of input services. They also argued that the demand is barred by limitation.
7C.3 After considering the facts on record and the submissions of both the sides, we find that for claiming the benefit of payment/reversal of Cenvat credit amount the appellant is required to give clear cut proof of payment/reversal of credit of input services. The appellant submits that the demand could be restricted to the proportionate credit on input services. We find that there is argument of time limitation also submitted by the appellant. As per the impugned order, this demand is for the period of November 2007 and August 2009; and these periods are completely beyond the time limitation i.e. beyond the normal period of one year. Consequently, said demand is barred from recovery by the provisions of Section 11A(4) of Central Excise Act, 1944, unless the Revenue is able to prove fraud or collusion or any willful mis-statement or suppression of facts or contravention of any provisions of laws of Central Excise and/or Service Tax with an intention to evade payment of duty on the part of the appellant.
7C3.1 We do not find any clear cut evidence that there has been any kind of fraud or collusion or willful mis-statement or suppression of facts or contravention of any provisions of laws concerning Central Excise and/or Service Tax on the part of the appellant with an intention to evade payment of duty. Therefore, this demand of Rs. 4,25,000/- is clearly barred by time limitation and is hereby set aside.
8. From the above discussions and analyses, it is evident that as per para 7A.2.1 above the demand of Rs. 13,78,91,547/- has been held as barred by time limitation as per the provisions of Section 11A(4) of Central Excise Act, 1944.
8.1 In case of demand of Rs. 35,88,72,223/- confirmed by the impugned order, we find and order that as per pare 7B.2 above, this demand survives only for the normal period of one year from the relevant date. The demand beyond the normal period of one year is barred from recovery as per the provisions of Section 11A(4) of Central Excise Act, 1944. Here, we hold that the appellant would be entitled to claim the benefit of reversal of Cenvat credit taken on inputs, if they are able to prove the said fact to the Revenue.
8.2 The demand of Rs. 4,25,000/- has been found to be for the period beyond the normal period of one year and, therefore, has been set aside in para 7C3.1 above in terms of the provisions of Section 11A(4) of Central Excise Act, 1944.
9. The matter is remanded to the Commissioner of Central Excise, Banaglore-1 Commissionerate, Bangalore, for re-quantification of the liability of the demand, interest and the penalty in terms of the observations and conclusions made above.
10. The appeal is decided and disposed off by way of remand to the Commissioner, Central Excise, Bangalore-1 in the above manner.
(Pronounced in the open court on 22/07/2016)
(ASHOK K. ARYA) (S. S. GARG)
TECHNICAL MEMBER JUDICIAL MEMBER
/vc/