Custom, Excise & Service Tax Tribunal
Bannari Amman Spinning Mills Ltd vs Commissioner Of Central Excise & ... on 6 July, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.E/41267/2015
[Arising out of Order-in-Appeal No.14/2015 dt. 16.3.2015 passed by the Commissioner of Central Excise (Appeals-I), Coimbatore at Madurai]
Bannari Amman Spinning Mills Ltd.
Appellant
Versus
Commissioner of Central Excise & Service Tax,
Madurai Respondent
Appearance:
Shri M. Saravanan, Consultant For the Appellant Shri L. Paneerselvam, AC (AR) For the Respondent CORAM:
Honble Shri P.K.Choudhary, Judicial Member Date of hearing : 10.06.2016 Date of Pronouncement :06.07.2016 FINAL ORDER No.41075/2016 M/s.Bannari Amma Spinning Mills, Unit-II Dindigul, the appellant herein, are engaged in the manufacture and clearance of Cotton Yarn falling under Chapter No.52 of the first Schedule to the CETA 1985. The appellant-assessee had been clearing cotton yarn for export on payment of duty under Notfn No.29/2004-CE dt. 9.7.2004 and also availing full exemption for domestic clearances under Notfn No.30/2004-CE dt. 9.7.2014. They had been availing cenvat credit of duty paid on inputs and capital goods and service tax paid on input services in the manufacture of both exempted and dutiable goods under the provisions of Cenvat Credit Rules, 2004. However, they did not maintain separate cenvat credit accounts for dutiable and exempted clearances. On verification of the cenvat credit documents, it was noticed that the assessee had not reversed properly the proportionate cenvat credit relating to exempted goods cleared every month as mandated under Rule 6 (3A) and Rule 6 (3) (ii) of CCR, but had reversed only part amount during the period from April 2011 to September 2011, rendering a short reversal of proportional input service credit of Rs.3,20,096/- for the said period as tabulated in SCN as under :- A Total input service credit taken from April 2011 to September 2011 Rs.9,13,974 B LESS : Eligible credit only taken out of A Rs.121592 C Total credit for the purpose of apportionment Rs.7,92,379 D Amount to be reversed :
@ 57.94% Rs.4,59,104 E LESS: the amount reversed from April 2011 to September 2011 Rs.1,39,008 F Differential amount to be paid Rs.3,20,096 It was alleged that appellant-assessee had been using the common input services in the manufacture of both dutiable and exempted final products and were paying/reversing the amount attributable to input services used in or in relation to manufacture of exempted goods in terms of Rule 6 (3) (ii) of CCR read with Rule 6(3A) of CCR. A show cause notice dt. 4.6.2013 was issued to the appellant proposing recovery of Rs.3,20,096/- being wrongly availed cenvat/short reversal of input service tax credit attributable towards exempted goods manufactured and cleared during 2011-12 (upto September 2011) in terms of provisions of Rule 6(3A) (d) and Rule 14 of CCR 2004 read with Section 11A (1) of the Central Excise Act, 1944. The notice also proposed to levy interest and impose penalty under Rule 15 (1) of CCR. The adjudicating authority vide OIO No.7/2014-Adjn. Dt. 21.8.2014 dropped the proposals made in the OIO. Aggrieved by the said order, Revenue preferred an appeal before Commissioner (Appeals) who set aside the OIO and confirmed the demand as proposed in the notice. Hence this appeal filed by appellant before Tribunal.
2. Shri M.Saravanan, Ld. Consultant appearing on behalf of the appellant submits that the dispute is with regard to service tax credit taken by the appellant on input services. The contention of the Revenue is that input services were used for both dutiable and exempted activities and hence proportionate credit @ 57.94% has to be reversed as per Rule 6 (3A) of the CCR 2004. He submits that adjudicating authority has recorded a finding at para 10 & 11 of his order dt. 21.8.2014 that the following input services are used exclusively for export of yarn on payment of duty :-
S.No. Category of Service Amount(Rs.)
1.
Courier Service (Export) 38,484
2. Commission Agency Services (Export) 5,35,149
3. Forex Advisory Services 3,218 TOTAL 5,76,851 He submits that proportionate credit reversal is applicable only for common services used for both dutiable and exempted activity. Since the above services were used exclusively for dutiable activity i.e. for export and no part of the services were used for domestic clearances, they are eligible for 100% credit. Hence the proportionate credit reversal of Rs.3,34,227/- [57.94% on Rs.5,76,851/-] is not payable by the appellant. He submits that out of the total credit of Rs.4,59,104/-, after deducting the above proportionate credit reversal amount of Rs.3,34,227/- not payable by them, the balance credit to be reversed is Rs.1,24,877/- . Since they have already reversed excess credit of Rs.1,39,008/- as per Annexure-C of SCN, there is excess credit reversal of Rs.14,131/- . Therefore, the entire demand should be set aside.
2.1 Ld. counsel submits that the following services were utilized by the appellant and they are eligible for full credit amount as furnished below :-
(i) Repair and Maintenance Service Rs.1,322/- (ii) Management Consultancy Service Rs.9,940/- (iii) Consultancy Services Rs.18,025/- (iv) Courier Services (Export) Rs.38,484/- (v) Commission Agency Ser.(Export) Rs.5,35,149/- (vi) Testing & Analysis Services Rs.293/- (vii) Forex Advisory Services Rs.3,218/- Total Rs.6,06,431/-
2.2 Ld. counsel also submits that as per Rule 6(5) of CCR, till 31.3.2011, the appellants are eligible to take 100% cenvat credit on the following services, as it is used for both dutiable as well as exempted activity :-
S.No. Category of Service Amount (Rs.)
1.
Repair and Maintenance Services 1,322
2. Management Consultancy Services 9,940
3. Consultancy Services 18,025 TOTAL 29,287 He submits that since the above services were received prior to 1.4.2011 when Rule 6(5) of CCR was in existence, the claim of the department seeking for proportionate credit reversal of Rs.16,969/- [57.94% on Rs.29,287/-] is unsustainable. In this regard, he relied on CESTAT's Final Order No.41149/2015 dt. 9.9.2015 in the case of Titan Paints and Chemicals Ltd.
2.3 As regards credit of Rs.19,762/- relating to excess reversal made by the appellant during the year 2010-11, which was taken as recredit as per Rule 6(3A) (f) of CCR 2004, he submits that they are not liable to reverse the proportionate credit amount of Rs.11,450/- [57.94% on Rs.19,762/-] as it pertains to the year 2010-11 and not relating to any service received during the period of dispute.
2.4 He submits that the invocation of extended period is not applicable in this case as the dispute is with regard to certain services, which are used exclusively for export of yarn and it is not a case of suppression of facts with intent to evade payment of duty.
3. Shri L. Paneerselvam, A.C, Ld. A.R appearing on behalf of Revenue submits that though appellants are eligible to avail credit prior to 1.4.2011 however it was taken belatedly and hence provisions of Rule 6(5) are applicable. He submits that the appeal is required to be remanded to the original authority for verification of facts.
4. In counter, Ld. consultant submits that export related services do not come under the purview of Rule 6(5) of CCR.
5. I have carefully gone through the records and the submissions made. I find that the appellants have been using the services under dispute exclusively for the purpose of export of yarn on which duty has been paid. The said fact has been clearly recorded in para-10 and 11 of the OIO. The fact that the export of yarn has been made and the same is not disputed goes to show that the appellant is eligible for cenvat credit. The policy of the government is not to burden the goods to be exported with domestic taxes as has been observed in various decisions of the Tribunal. The reasons are obvious. Generally, it is not intended to make domestically produced goods, when exported to the foreign market, to become uncompetitive by means of increasing its cost. The view that exports should not be burdened is a consistent view taken by various Tribunal and I find that in the facts and circumstances of the case, credit is eligible and no reversal of credit is warranted. The fact that credit availed is for exported goods is not under dispute. Accordingly, the Order-in-Original is upheld and the impugned order is set aside. Appeal is allowed.
(Order pronounced in open court on 06.07.2016) (P.K.CHOUDHARY) JUDICIAL MEMBER gs 7