Custom, Excise & Service Tax Tribunal
Cce, Indore vs Zyg Pharma Pvt. Ltd on 4 July, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT III
Excise Appeal No.E/995/2008 EX [DB]
Excise Appeal No.E/1301/2008 EX [DB]
[Arising out of Common Order-in-Appeal No.IND-I/68/2008 dated 28.03.2008 passed by the Commissioner (Appeals), Customs, Central Excise, Indore]
For approval and signature:
HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)
HONBLE MR. R.K. SINGH, 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?
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?
4
Whether Order is to be circulated to the Departmental authorities?
Excise Appeal No.E/995/2008 EX [DB]
[Arising out of Order-in-Appeal No.IND-I/68/2008 dated 28.03.2008 passed by the Commissioner (Appeals), Customs, Central Excise, Indore]
CCE, Indore Appellant
Vs.
ZYG Pharma Pvt. Ltd. Respondent
Excise Appeal No.E/1301/2008 EX [DB] [Arising out of Order-in-Appeal No.IND-I/68/2008 dated 28.03.2008 passed by the Commissioner (Appeals), Customs, Central Excise, Indore] ZYG Pharma Pvt. Ltd. Appellant Vs. CCE, Indore Respondent Present for the Appellant : Shri.Yogesh Agarwal, D.R. Present for the Respondent: Shri.Archit Agarwal, C.A. Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HONBLE MR. R.K. SINGH, MEMBER (TECHNICAL) Date of Hearing/Decision: 04.07.2016 FINAL ORDER NO.52500-52501/2016 PER: R.K. SINGH Revenue is in appeal against order-in-Appeal No. IND-I/68/2008 dated 28.03.2008 (which upheld the Order-in-Original dated 13.12.2007 in terms of which demand of Rs.4,17,918/- only was confirmed) on the ground that the Commissioner (Appeals) did not confirm the entire demand of Rs.23,37,973/- raised on the ground that the respondent was liable to pay 10% of the value of the exempted goods as it had taken cenvat credit on common input services which are used for manufacture of dutiable as well as exempted goods.
2. The ld. Advocate for the respondent pleaded that the appellant took total credit of Rs.4,17,918/- on common input services which it reversed even prior to the issuance of the Order-in-Original. Therefore, the Revenues appeal has no substance. He cited the judgment in the case of Josts Engineering Co. Ltd. vs. CCE, Mumbai-III 2015 (320) ELT 157 (Tri.-Mum.).
3. Regarding the appeal filed by the respondent assessee the ld. Advocate admitted that the amount was reversed prior to the passing of the Order-in-Original and in its response to the show cause notice it claimed that the demand should not be sustained as entire amount of credit taken on input services had been reversed. It also filed cross objection to Revenues appeal.
4. We have heard and considered the contention of both sides. We find that the entire amount of cenvat credit taken on the common-input services used for manufacture of exempted as well as dutiable goods was reversed prior to the issuance of the primary adjudication order. In the case of Josts Engineering Co. Ltd. (Supra) (in para 5.2) the Honble Tribunal dealing with similar circumstances held as under:-
5.2?In the present case it is an admitted fact the appellant did not maintain separate accounts for the input services used in or in relation to the manufacture of product dutiable as well as exempted products even though they maintained such accounts in respect of inputs. Therefore, two options were available to them, i.e., either to pay 5%/10% of value of the exempted goods or pay an amount equal to the credit attributable to the input services used in or in relation to manufacture of exempted goods subject to the provisions of Sub-Rule (3A). When the mistake was pointed the appellant reversed not only the credit taken on input services used in the manufacture of exempted goods but also the credit taken on input services used in the manufacture of dutiable goods. 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 non-taking of the credit. The Honble 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 Honble 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 Honble 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 by the appellant on the entire service tax taken along with interest thereon both in respect of dutiable goods as well as exempted goods amounts to non-availing of credit and, therefore, the provisions of Rule 6(3)(i) are not attracted and the confirmation of demand by the adjudicating authority directing the appellant to pay an amount at the rate of 5%/10% of the value of the exempted goods is not sustainable in law. Consequently, the imposition of penalties on the appellant and appellant firm and its manager are also not sustainable in law and accordingly, they are set aside. However, the appellant has initially availed credit and only on pointing out by the department they have reversed the credit and, therefore the appellant is liable to penalty under Rule 15(3) of the Cenvat Credit Rules, 2004 for contravention of the provisions of Cenvat Credit Rules. The maximum penalty imposable under the said Rule is Rs. 2000/- and accordingly the appellant is liable to pay penalty of Rs. 2000/- under Rule 15(3) of the Cenvat Credit Rules, 2004.
5. In the present case we find that the cenvat credit taken on common input services was reversed but not alongwith interest and therefore as per judgment cited by the ld. Advocate for the respondent-assessee the interest would become payable.
6. As regards the respondents appeal, we find the same to be infructuous inasmuch as, in contesting the Revenues appeal it has taken the plea that the entire credit taken on input services used in the manufacture of dutiable as well as exempted goods had been reversed before issue of the primary adjudication order and the impugned order-in-appeal only upheld the primary adjudication order which only confirmed the amount (Rs.4,17,918/-) which the appellant had already reversed. It had taken this plea before the Commissioner (A) also.
7. In the light of foregoing, we partially allowed the Revenues appeal only to the extent that in addition to the reversal of the credit already affected by the respondent, it (i.e. the respondent) shall also pay the interest leviable thereon. The respondents appeal stands disposed of and dismissed as infructuous.
[Dictated and pronounced in the open Court)
(R.K. SINGH) (S.K. MOHANTY)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
Anita
??
??
??
??
0
4