Custom, Excise & Service Tax Tribunal
M/S. Prism Cement Ltd vs Cce, Bangalore on 18 October, 2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT BANGALORE
Bench SMB
Court I
Date of Hearing: 18/10/2013
Date of decision: 18/10/2013
Appeal No.E/1506/2011
(Arising out of Order-in-Appeal No.38/2011-CE dt. 18/03/2011
passed by CCE (Appeals-I), Bangalore)
M/s. Prism Cement Ltd.
..Appellant(s)
Vs.
CCE, Bangalore
..Respondent(s)
Appearance Ms. Sandhya, Advocate for the appellant.
Mr. S. Teli, Deputy Commissioner (AR) for the respondent.
Coram:
Honble Mr. B.S.V. Murthy, Member (Technical) FINAL ORDER No.26795/2013 [Order per: B.S.V. Murthy] The assessee are the manufacturers of excisable goods viz. (i) Ceramic Glazed Tiles (CTH 6908 9090) and (ii) Flat Bed. Screens (CTH.5911 2000) etc.
2. The unit's records are audited covering the period from l0/2007 to 12/2008 by Internal audit party during Jan'2009. It was observed that, as far as Tiles are concerned they clear at concessional rate of duty of 8%+2%+1% by availing benefit of Exemption Notification No.5/2006-CX dt.1.3.2006. The Notification stipulates that, in order to avail concessional rate of duty, the assessee (i) shall not avail the credit on inputs and
(ii) shall not use the electricity in firing the Kiln.
It was observed that, the assessee has fulfilled both of the conditions and hence eligible for the benefit of notification and the transactions are found to be in order.
3. As far as "Flat Bed Screens" are concerned, they are (i) clearing at nil rate of duty to their sister units for further use in the manufacture of excisable goods, by availing benefit of Exemption Notification No.30/2004 dt.9.2.2004 as amended, and (ii) Captively consuming without payment of duty under Exemption Notification No.68/97-CE dt.1.3.2007. As far as Notification No.30/2004 is concerned, the Notification stipulates that, to avail the benefit, the assessee "shall not avail the credit on inputs". As could be verified from the records, it is observed the assessee is not availing the credit on inputs. However it is found that they avail the credit on Capital Goods and Input Services.
4. It is mentioned here that the IAP which has visited the unit during 12/2007 had observed that, as the assessee was availing credit on input services, and as input and input services are parallel, the benefit of Exemption Notification No.30/2004 cannot be extended. The IAP has raised an objection (pars) for a sum of Rs.8.24 Lakhs covering the period from 9/2006 to 12/2007.
5. Further, it is mentioned here that, a similar objection was raised earlier in respect of the clearances of Glazed Tiles also. The issue was finally decided by the Commissioner (A) vide OIA.No.34/2008-CE dt.27.2.2008 and the benefit was allowed. It was held therein that, no parallel can be drawn between input credit and input services as these are governed by two different set of Rules. The OIA was accepted in review on 5.5.2008.
6. Now, for the instant case of Flat Bed Screens the same analogy was adopted, and after due examination the Audit objection was treated as closed on 18.8.2008.
7. In view of all the foregoing facts, the present status is that, the assessee is manufacturing and clearing, (i) Glazed Tiles on payment of concessional rate of duty at 8%+2%+I% (Notn.No.5/06 dt.1.3.2006), and (ii) Flat Bed Screens at nil rate of duty (Notn.No.30/2004 dt.9.7.2004)
8. In a nut shell, the activities of the assessee can be summarized as under;
(i) Manufactures and clears Dutiable as well as Exempted goods;
(ii)Does not avail credit on inputs, but avails credit on capital goods and input services; Commonly utilizes the input services for the manufacture and clearance of dutiable as well exempted goods.
9. Further, the above said activities of the assessee are examined for their adherence and conformity to Rule 6 of the Cenvat Credit Rules 2004. It is mentioned here that Rule 6 has been amended by virtue of Notification No. 10/2008- CE (NT) dt.1.4.2008. Hence the Notification shall be read as it existed (A) prior to 1.4.2008 and (B) after 1.4.2008 and is as under;
(A) Period prior to 1.4.2008:
A plain reading of Rule 6 of CCR 2004 reveals that, the manufacturer of dutiable and exempted goods shall maintain separate accounts for receipt, consumption and inventory of input and input services meant for use in the manufacture of dutiable final products and exempted products, or If the exempted goods are final products falling within Chapter Hgs.50 to 63 of the first schedule, the manufacturer shall pay an amount equivalent to the CENVAT attributable to inputs and input services used in or in relation to the manufacture of such final products.
(B) For the period after 1.4.2008:
The manufacturer is expected to maintain separate accounts [Rule6 (2)], or
(i) either the manufacturer shall pay an amount equal to 10% of the value of exempted goods, or
(ii) pay an amount equal to the CENVAT credit attributable to the input services used in or in relation to the exempted goods subject to the conditions; that the assessee shall follow the procedure stipulated under Sub-Rule 6(3) (A) of CCR 2004.
10. In the instant case, it is observed that, the assessee is availing credit on input services like (i) Man Power Recruitment services (ii) security Services (iii) Erection and Commissioning (iv) Consultant Services (v) Telephones (vi) Canteen Services etc. These services are commonly being utilized for the manufacture and clearance of dutiable as well as exempted goods, and no separate accounts for receipt, consumption etc. meant for use in the manufacture of dutiable and exempted goods are maintained. The assessee vide their letter dt.29.4.2008 addressed to the Range Officer has exercised an option to opt for Sub-rule 3(ii) under Rule 6 of CCR 2004.
11. In view of the above the audit was of the opinion that,
(i) for the period prior to 1.4.2008, the assessee has to pay an amount equivalent to the CENVAT credit attributable to the input services used in the manufacture of exempted goods. Secondly,
(ii) for the period w.e.f 1.4.2008, the assessee has to pay an amount provisionally on a monthly basis as detailed below;
Amt Payable every month = E/F*G Where E= Total value of Exempted goods manufactured and cleared during the preceding Financial Year F= Total value of dutiable and exempted goods during the preceding Financial year G= Cenvat credit taken on the input services during the [Sub-Rule 3(A) (b) under Rule6 of CCR'2004 refers) month.
Further Final payment shall be made in terms of Sub-Rule 3(A) (c) after the completion of the Financial year.
12. It is mentioned here that the assessee vide their letter dt.29.4.2008 addressed to the Range Officer has exercised their option under Rule 6(3A) opting for the procedure under Rule 6(3) (ii). It observed that, the assessee even though exercised an option to follow the procedure as laid down under Sub-Rule (ii) under Rule 6 of CCR 2004, has not paid any amount so far, which is to be recovered from them along with Interest.
13. Thereafter proceedings were initiated by issuing a show-cause notice on 27/05/2009 proposing to deny proportionate CENVAT credit availed in respect of exempted products on input services which resulted in confirmation of demand of Rs.2,04,370/- towards ineligible CENVAT credit with interest and imposition of penalty of Rs.10,000/-.
14. The learned counsel submits that the proportionate credit has been denied on the ground that the appellant has utilized the input services for dutiable as well as exempted products and in terms of provisions of Rule 6, they could not have availed the same in the absence of maintenance of separate records. She submits that according to Notification No.30/2004 which was being availed by the appellant, the appellant was eligible for exemption from whole of the duty payable if no CENVAT credit is availed on inputs. There was no condition that CENVAT credit of service tax paid on input services cannot be availed. Further she draws my attention to explanation provided under Rule 3(7) of CENVAT Credit Rules as under: Where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules. It is her submission that in view of the explanation, the appellant is eligible for availing CENVAT credit since the notification does not mention input service and does not deny the exemption if credit is availed on input services. Further she also submits that a portion of the demand is time-barred in view of the fact that the very same issue had been considered earlier and Commissioner (Appeals) had ruled in their favour.
15. The learned AR on the other hand submits that the provisions of Rule 3 would not be applicable to the situation here and in view of the provisions of Rule 6, the appellant would not have availed the benefit of credit of service tax paid on input services in respect exempted products.
16. I have considered the submissions made by both the sides. As regards application of explanation to Rule 3(7) of CCR, I find that the rule is applicable. The rule would not have been applicable if the Notification was to provide that the exemption would be available if input service was mentioned in the notification. If there is an exemption available to a finished goods in spite of the fact that credit has been availed and if the notification specifically provides that CENVAT credit even if it is taken benefit would be available the provisions of Rule 3 may be attracted. In a case where the exemption is denied if the credit is availed and the notification nowhere mentions input service, provisions of explanation would not be attracted. Therefore, I am unable to consider this submission
17. Coming to the provisions of Rule 6, it is quite clear that credit can be taken only if separate accounts are maintained in the case of inputs or input services which are used for dutiable and exempted goods. In this case, appellant has taken CENVAT credit on input services and therefore they were bound by law to maintain separate account or not to avail credit. In the absence of maintenance of separate accounts, the credit on input services was clearly not eligible. In fact, the Department could have demanded the amount payable as per Rule 6(3) of CCR. However, they have chosen to demand only proportionate credit. Therefore the consideration also is limited to the question as to when input service tax credit has been taken, provisions of Rule 6 regarding the availability of credit was attracted or not. Rule 6(1) clearly denies CENVAT credit in respect of exempted products. In the absence of any specific provisions, the appellant is bound to reverse the credit taken. At this stage, the learned counsel made another submission that there were services which are among the 17 services listed in Rule 6(5) and in respect of these services credit can be taken even if they are used in dutiable and exempted products. She submitted that the amount attributable to these services is Rs.10, 361/-. I find that this submission is correct and therefore the payable amount to be demanded has to be reduced by this amount.
18. Finally, I have to consider whether extended period could have been invoked or not. The learned counsel submits that the very same issue had been under consideration of the Department and therefore the extended period could not have been invoked. However, I find that as found from the audit observation reproduced above, the earlier proceedings was relating to the issue as to whether the appellant was eligible for exemption even when credit of input service tax had been taken or not. The issue was not whether the appellant is required to reverse proportionate credit when the services are used in dutiable and exempted products. Therefore the fact that there was an earlier proceedings would not be of any help. Moreover, as observed in the audit paragraph, in April 2008, the appellant themselves had exercised the option for proportionate reversal of the credit introduced in that year. But never implemented the same. This also shows that even in the year 2008, the appellant did know that they were not eligible for the entire amount of service tax credit taken by them and they were required to follow procedures. In spite of this, the appellant chose to wait for proceedings to be initiated by the Revenue for recovery of the wrongly availed service tax credit and the matter has gone right up to this Tribunal. Under these circumstances, I consider that the claim that there was no suppression or misdeclaration cannot be considered. When the appellant did not reverse the proportionate credit or pay the amount as prescribed under Rule 6(3) or did not implement the option exercised by themselves, there is a clear misdeclaration or suppression on their part and therefore I do not find any merit as regards the submission relating to invocation of extended period or suppression of facts. In any case, since penalty has not been imposed equal to service tax and only Rs.10,000/- has been imposed, I find that there is no need to disturb this penalty also. In the result, the appeal is rejected but for relief to the extent of Rs.10,351/- being the service tax credit attributable to services which are permitted to be used in respect of which service tax credit can be taken when they are used in dutiable and exempted products by the appellant.
(Pronounced and dictated in open court) (B.S.V. MURTHY) MEMBER (TECHNICAL) Nr 11