Custom, Excise & Service Tax Tribunal
Baxter (India) P. Ltd vs Commissioner Of Central Excise And ... on 24 March, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. I
Excise Appeal No. 87386 of 2017
(Arising out of Order-in-Original No. 67/CEX/COMMR/2017 dated 27.06.2017 passed by
the Commissioner of Customs, Central Excise & Service Tax, Aurangabad.)
Baxter (India) Private Limited .... Appellants
Plot No. B-15/2, MIDC, Waluj
Aurangabad - 431 136.
Versus
Commissioner of Customs, Central Excise & .... Respondent
Service Tax, Aurangabad Commissionerate N-5, Town Centre, CIDCO Aurangabad - 431 030.
APPEARANCE Shri Rajesh Ostwal, Advocate for the Appellants Shri Rajeev Ranjan, Authorized Representative for the Respondent CORAM:
HON'BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) HON'BLE MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) FINAL ORDER NO. A/85495/2026 Date of Hearing: 10.12.2025 Date of Decision: 24.03.2026 Per: M.M. PARTHIBAN This appeal has been filed by M/s Baxter (India) Private Limited, Aurangabad (herein after, referred to as "the appellants", for short) assailing the Order-in-Original No. 67/CEX/COMMR/2017 dated 27.06.2017 (herein after, referred to as "the impugned order") passed by the Commissioner, Customs, Central Excise & Service Tax, Aurangabad.
2.1 Brief facts of the case, leading to this appeal, are summarized herein below:
2.2. The appellants herein is engaged inter alia, in the manufacture of medicaments falling under Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 at their factory at MIDC, Waluj. The appellants are registered taxpayers holding Central Excise Registration No. AAACB3906FXM001 for manufacture of aforesaid finished products and for compliance with the central excise statute. The finished products 2 E/87386/2017 manufactured by the appellants include both dutiable goods viz., Ciprofloxacin Injection USP, Ciprofloxacin I.P 100 ML, Metronidazole 100 ML USP, Mannitol Injection 20% IP; and exempted goods viz., Amino drip and preparations of minerals and their supplements. The registered office/head office of the appellants situated at Gurgaon, is separately registered with the Service Tax Department as an Input Service Distributor ('ISD') and during the disputed period covering July, 2007 to June, 2009, they had distributed the CENVAT credit to the respective manufacturing units of the appellants, including the appellants' unit situated at Waluj, Aurangabad.
3.1 Denial of CENVAT Credit of Service Tax paid on various input services is the subject matter of present dispute. In the course of EA-2000 audit conducted by the department on 25.10.2008 to 27.10.2008, upon scrutiny of details, documents on the basis of which CENVAT credit of service tax has been taken by the appellants during the disputed period, the department had objected to credit taken on certain services on the ground that the appellants had not maintained separate accounts for both dutiable & exempted final products in availing CENVAT credit as per Rule 6 of the CENVAT Credit Rules, 2004 (for short, referred to as "CCR, 2004") and had availed CENVAT credit of input services for both dutiable and exempted goods without informing the same to the department. Thus, it was alleged that the appellants are liable for payment of Rs.10,41,35,815/-, being the amount equivalent to 10% on the value of exempted goods cleared during the disputed period. Therefore, the department issued Show Cause Notice (SCN) No.45/ ST/Commr/2010 dated 09.04.2010 against the appellants for recovery of irregular CENVAT credit taken during the period July, 2007 to June, 2009 by invoking extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944 read with Rule 14 of CCR, 2004 and for imposition of penalty on the appellants under Section 11AC ibid and Rules 15(2) and 15(4) of CCR, 2004.
3.2 In adjudication of the aforesaid SCN dated 09.04.2010, the learned Commissioner vide impugned Order-in-Original dated 27.06.2017, had confirmed all the proposals made in the SCN. Feeling aggrieved with the impugned order in confirmation of the adjudged demands, the appellants have preferred this appeal before the Tribunal.
4.1 Learned Advocate appearing for the appellants had submitted that the appellants in manufacture of medicaments, wherever it is chargeable to 3 E/87386/2017 duty, they avail CENVAT credit of duty paid on inputs used in the manufacture of such goods; they also avail credit of service tax paid on the input services received directly at the Waluj factory which is pertaining to dutiable goods. Wherever the finished goods manufactured by the appellants is exempted from payment of duty, they do not avail CENVAT credit of duty paid on inputs/input services used in the manufacture of such goods. He further stated that the appellants Head Office/Registered Office is separately registered with the Service Tax Department as an Input service distributor ('ISD') and during the disputed period they had distributed the following CENVAT credit to the appellants under three invoices, details of which are given by him as below:
Month in which credit was taken Amount of credit
on ISD invoice (Rs.)
July 2007 12,31,487
November 2007 32,83,024
March 2009 2,12,287
Total 47,26,798
He had also provided the service wise break-up of the aforesaid amount of CENVAT credit is as under:
Sr. Category of input service Amount of
No. credit (Rs.)
1 Interior decorator 2,371
2 Consulting Engineer services 10,920
3 Management Consultant 16,83,260
4 Security Agency 4,00,815
5 Scientific or technical consultancy 41,922
6 Banking and Financial services 8,481
7 Erection, Commissioning & 1,66,750
Installation
8 Management, maintenance or repair 20,49,574
9 Technical testing and analysis 1,04,064
10 Technical Inspection & certification 2,12,077
11 Commercial & Industrial 25,392
construction services
12 IT charges 21,173
Total 47,26,799
In respect of the aforesaid services, the learned Advocate submitted that since these input services are covered by taxable services specified in Rule 6(5) of CCR, 2004 and is not exclusively used in the manufacture of exempted goods, the appellants had properly availed credit of service tax on the aforesaid services in terms of Rule 6(5) of the CCR of 2004.
4.2 Learned Advocate further submitted in the impugned order dated 27.06.2017, the proposals made in the SCN dated 09.04.2010 issued by the department, for duty demand of Rs. 10,41,35,8157/- under Rule 4 E/87386/2017 6(3)(b) of the CCR of 2004 for the period July 2007 to June 2009, being an amount equal to 10% of the value of exempted goods cleared by the appellants have been confirmed along with interest and penalty. However, post issuance of SCN, out of abundant caution, the appellants had immediately reversed an amount of Rs.17,49,037/- along with interest of Rs.13,50,552/- vide Challan No.1930 dated 4.11.2010 (for Rs.7,12,601/-) and Challan No.125 dated 14.12.2010 (for Rs.6,37,951/-) against services such as Garden maintenance, Car Rental, clearing and forwarding, EPABX repairs and maintenance, Computer maintenance, software development and lift maintenance etc., even though the same is covered under Rule 6(5) of CCR. However, these have not been properly considered by the learned adjudicating authority.
4.3 He further stated that the disputed services are entirely covered by Rule 6(5) of CCR of 2004. As the impugned Order does not dispute this position, he pleaded that even if those services are used in the manufacture of exempted and dutiable goods, CENVAT credit of those services is wholly available to the appellants. Hence, the appellants are eligible to avail full credit and therefore these are not covered under Rule 6(3) ibid. He claimed that this position also gets support from the Circular No.l37/203/2007-CX.4 dated 1.10.2007 issued by CBEC, wherein it has categorically clarified as follows:
"The basic purpose of identifying 17 specified services for special dispensation is that these services are used- in relation to the entire activities of the service provider and cannot be co-related or apportioned with any individual service (whether taxable or exempted) provided by such service provider."
Therefore, he claimed that the intention of the legislature was to give CENVAT credit of full amount of service tax paid on 17 input services, as these services cannot be identified with any particular activity of the assessee and used for the entire activities of the assessee, whether taxable or non-taxable. In support of the above stand, he placed reliance on the following case laws:
(i) GHCL Ltd. Vs. CCE - 2009 (242) E.L.T. 468 (T)
(ii) CCE Vs. V. M. Salgaonkar & Bros Pvt. Ltd. - 2008 (10) STR 609 (T) 4.4 Learned Advocate in explaining the eligibility of the individual input services had stated the following:
(i) garden maintenance service is covered under the category of Management Maintenance and Repair service as the said category of 5 E/87386/2017 service cover repair and maintenance of any movable or immovable property.
(ii) car rental service is incorrectly mentioned & it is actually a service relating to maintenance of car parking. In other words, these services were also related to repair and maintenance of parking space in the factory.
(iii) The clearing and forwarding services were exclusively used in relation to manufacture of dutiable goods or goods exported.
(iv) EPABX, computer and lift maintenance are specifically covered under the category of Management maintenance and repair services.
(v) The software development services are covered by consulting engineer service which is also a specified service under Rule 6(5) of the CCR of 2004.
Therefore, he stated that the appellants have correctly taken credit on services. Even if it is assumed that certain services are not covered by Rule 6(5) of the CCR, 2004, the appellants have already reversed credit on the disputed services mentioned in the SCN. Sub-rule (3) of Rule 6 is attracted only when the assessee does not want to comply with sub-rule (1) of Rule 6 by reversing the credit. In other words, he stated that only when assessee wants exemption as also credit, he must comply with Rule 6(3)(b).
4.5 He further stated that Rule 6 of the CCR of 2004 has been retrospectively amended for the period prior to 1.4.2008 in providing for pro-rata reversal of credit. The appellants had reversed the entire credit alleged to be common for the manufacture of exempted goods and dutiable goods cleared during the period from July 2007 to March 2008. Therefore, he pleaded that the demand of 10% of the sale price of exempted goods under Rule 6(3)(b) is legally not sustainable. Further, he claimed that the benefit of aforesaid retrospective amendment has been extended by various judicial forums even in the case where there was no declaration filed by the assessee as specified in Section 73(2) of the Finance Act, 2010 and hence in their case too, such benefit is extendable. In this regard, he relied upon the following case laws:
(i) Principal Commissioner, Ludhiana Vs. Suraj Solvents - 2023 (384) ELT 526 (P & H)
(ii) Swiss Parenterals Pvt. Ltd. v CCE&ST - 2014 (308) E.L.T. 81 (T)
(iii) CCE Vs. Burn Standard Co. Ltd. - 2013 (295) E.L.T. 671 (Mad.)
(iv) Shree Rama Multi Tech Ltd. Vs. UOI - 2011 (267) E.L.T. 153 (Guj.)
(v) CCE v Kudremukh Iron & Steel Co. Ltd. - 2011 (271) E.L.T. 172 (Kar.) 6 E/87386/2017 On the above basis, he pleaded that the demand of an amount equal to 10% of the value of exempted goods confirmed in the impugned order is incorrect and baseless. Further, he stated that such unreasonable result cannot be intended by the legislature as held by the Hon'ble Supreme Court in the case of CIT Vs. National Taj Traders - 1980 (1) SCC 370 wherein it was held that an intention to produce an unreasonable result, is not to be imputed to a statute, if there is some other construction available. He also stated that since the appellants had fully complied with provisions of CCR of 2004, and they were of the bonafide belief that tax has been correctly discharged and credit correctly availed, the imposition of penalty under Section 11AC of the CEA is incorrect and unsustainable.
5. Learned Authorised Representative (AR) appearing for the department, while reiterating the findings in the impugned order, submitted that the appellants did not opt for the optional payment under Rule 6(3A) of CCR of 2004 and did not submit proper documents for verification of the payment of CENVAT amount. Therefore, he claimed that the impugned order demanding 10% of the value of exempted goods along with interest and imposition of penalty is sustainable.
6. Heard both sides and perused the records of the case. We have also examined the submissions advanced by learned Advocate appearing for the appellants and the learned Authorized Representative of the Department. Further, we have also perused the additional written submissions in the form of paper books submitted by both sides along with citation of case laws mentioned in support of their case.
7. The issue involved in this appeal is to examine the eligibility to avail CENVAT credit on various input services taken and utilized by the appellants during the course of manufacture of dutiable finished goods and exempted goods in their factory at Waluj village under the CENVAT Credit Rules, 2004; and whether such credit was availed properly in terms of the obligations entrusted to the appellants as a manufacturer of both dutiable and exempted goods under Rule 6(3)(a) ibid. Further, for the purpose distributing the service tax paid on various input services which was initially obtained by the registered/head office situated Gurgaon and later availed by the appellant unit, the appellants have proportionately distributed the input service in compliance with CCR of 2004, the quantum of which was mentioned in the SCN dated 09.04.2010 as Rs.47,26,798/- during the disputed period from July, 2007 to June, 2009. It is an undisputed fact of 7 E/87386/2017 the case that service tax has been paid on all the input services which are in dispute. The only dispute to be considered for a decision is whether the credit of service tax paid on input services distributed under ISD, which was taken by the appellants' unit at Waluj as CENVAT credit, was availed properly in terms of Rule 6 of the CCR, 2004, or is it in violation of the said rule.
8.1 It can be seen from the factual matrix of the case at paragraph B.4 of the impugned order, that the appellants have pleaded that in terms of Rule 6(5) of the Rules of 2004, they being a manufacturer of excisable goods are eligible to avail full credit of service tax paid on the specified seventeen input services mentioned in Rule 6(5) of CCR, 2004 (existed in the Rules of 2004 until 30.03.2011), which are part of the disputed input services on which CENVAT credit was taken by the appellants. Further, the details of such credit taken by the appellants on these services amounting to Rs.47,26,798/- (in three specific entries) was also mentioned in paragraph 2 of the impugned order. It is also an undisputed fact that the appellants had examined their records and reversed CENVAT credit for an amount of Rs.17,49,037/- towards certain inputs services viz., garden maintenance, car rental, clearing and forwarding services, EPABX repairs and maintenance service, computer maintenance, software development service and lift maintenance services which were being used commonly on dutiable and exempted goods and were considered by them as not eligible in terms of Rule 6 ibid.
8.2 From the above facts, it transpires that the disputed credit relates to CENVAT credit taken on input services viz., (i) Rs.12,31,487/- being credit for input services procured in Waluj by the appellants during July, 2007;
(ii) ISD credit of input services distributed through ISD invoice for Rs.32,83,024/- during November, 2007, and (iii) another ISD invoice for Rs.2,12,287/- during March, 2009, totally amounting to Rs.47,26,798/-. The input services which are interpreted by the department as ineligible on the ground that these services have been used commonly for both dutiable and exempted goods and no separate records were maintained, as mentioned at paragraph 2 of the SCN in specific terms are garden maintenance, car rental, clearing & forwarding, EPABX repairs & maintenance, computer maintenance, software development and lift maintenance.
8E/87386/2017 8.3 Further, the appellants had agitated before the learned Commissioner that such CENVAT credit reversal attributable to input services used in or in relation to both dutiable and exempted final products for which the CENVAT credit was reversed by them should be considered under the provisions of Section 73 of the Finance Act, 2010, in getting the dispute settled. These aspects has been discussed by the learned Commissioner in the impugned order in his 'Discussion and Findings' by holding that during the period prior to 01.04.2008, the appellants needed to maintain separate records for dutiable and exempted goods and to take CENVAT credit only on that quantity of inputs/input services which is intended for use in the manufacture of dutiable goods; post 01.04.2008, even though he agreed with the appellants that they have the option provided under Rule 6(3) ibid to be exercised for payment of appropriate amount attributable to exempted goods, he held that they had "not followed the procedures and conditions of sub-rule 3(A) of Rule 6 of the Credit Rules for determination and payment of amount payable under the said Rules" and hence he cannot accept the reversal of CENVAT credit made by the appellant on the basis of proportionate turnover. For the confirmation of adjudged demands, in the end at paragraph 13, the learned adjudicating authority had remarked as follows: "I find the contention of the noticee are correct there was the provision for settlement of the dispute, but it was with certain conditions. The relevant provisions are as follows:... I find that the notice had failed to submit that they had applied for the availment of the above scheme within the period of six months from the date on which the Finance Bill 2010 receives the assent of the President. There is nothing on record to suggest that the notice had applied within the prescribed time limit and same had been accepted by the competent authority. Thus, the provisions of erstwhile Ruyle 6(7) of CENVAT Credit Rules, 2004 are not applicable in the present case." It is also a fact that there is no dispute that the appellants are eligible to avail CENVAT credit, but since they did not follow the conditions prescribed in the provision of Rule 6(3) of the Rules of 2004 and Section 73 of the Act of 2010, the appellants were denied the benefit of settlement of their claim and the payment of the CENVAT credit amount was not considered as sufficient compliance in terms of Rule 6(3) of the Rules of 2004. Therefore, we find that the issue to be addressed by the Tribunal lie in the narrow compass of examination of the aforesaid provision under Section 73 of the Finance Act, 2010.
9E/87386/2017 9.1 Rule 6(5) of the CCR of 2004, which was in force during the disputed period, provided a non-obstante clause under Rule 6 ibid for extending credit of whole of the service tax paid on seventeen specified input services mentioned therein, even though these were used commonly in or in relation to manufacture of dutiable as well as exempted goods, with the exception that such provision is not applicable for those input services used exclusively in relation to exempted goods. The extract of the said legal provision is quoted below:
"Rule 6(5): Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clauses (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services."
The aforesaid seventeen specified taxable services for which input credit of service tax used commonly in dutiable as well as exempted final product is eligible to be availed as CENVAT credit are the following: (i) consulting engineering service (ii) architect service (iii) interior decorator service (iv) management or business consultant service (v) real estate agent service (vi) security services (vii) scientific or technical consultancy service (viii)&(ix) Banking and Financial services of both types i.e., provided by a banking, non-banking or financial institutions and other body corporates (x) insurance agency service (xi) erection, commissioning, installation services (xii) management, maintenance, repair services (xiii) technical testing and analysis service (xiv) technical inspection and certification service (xv) foreign exchange broking service (xvi) commercial or industrial construction services (xvii) intellectual property service. Since the disputed services relate to maintenance of garden, car parking area, EPABX telephone exchange facility, computers, lifts etc., which are part and parcel of the assets of the business organization in running the day to day operations, these in our opinion form part of the management, maintenance, repair services covered under Section 65(105)(r). Further, the services relating to software development maintenance is also covered more specifically under Section 65(105)(g) as consulting engineer service in relation to advice, consultancy or technical assistance in any manner in the discipline of computer hardware as well software engineering. Thus, we are of the considered opinion that the input services under dispute are covered under the specified taxable services mentioned in Rule 6(5) of the CCR, 2004 for which CENVAT credit of service tax paid on input services 10 E/87386/2017 used commonly in or in relation to manufacture of dutiable as well as exempted goods, was allowed under a non-obstante clause. It is not the case of the department that such disputed services were used exclusively in relation to exempted goods. Therefore, we find that on this ground alone the impugned order confirming the adjudged demands is liable to be set aside.
9.2 It has been held in a number of judicial pronouncements by the Hon'ble Supreme Court including the case of Union of India Vs. G.M.Kokil
- AIR 1984 SC 1022, that a non-obstante clause is appended to a particular provision of the Act/Rules, in order to provide an overriding effect to such provision in case of conflict with other provisions of such Act/Rules. In Rule 6(5) of CCR of 2004, it has been provided that notwithstanding anything contained in the provisions of sub-rule (1), (2) and (3) of Rule 6 ibid, the provision of sub-rule (5) will have overriding effect, in extending the CENVAT credit of duty/tax paid on input/input service used in relation to both dutiable and exempted goods. Therefore, we find that the findings of the learned Commissioner in the impugned order for confirming the adjudged demands on the ground that the conditions prescribed in the provision of Rule 6(3) of the Rules of 2004 was not complied with by the appellants, does not stand the scrutiny of law.
9.3 It can be seen from paragraph 3 of the 'Discussion and Findings' recorded by the learned Commissioner in the impugned order that he had not accepted the reversal of proportionate CENVAT credit by the appellants for the reasons that they had not followed the procedures and conditions of sub-rule 3, 3A of Rule 6 of CCR, 2004 for determination and payment of amount and such deliberate contravention attract imposition of penalty on the appellants under Rule 15 ibid read with Section 11AC of the Central Excise Act, 1944. It can be seen from the extract of Rule 6(5) of CCR, 2004 given in the paragraph at 8.4 above, that the provision starts with a non- obstante clause "notwithstanding", which would indicate that the provision of Rule 6(3) are not applicable for the provisions of Rule 6(5) of Cenvat Credit Rules, 2004. Therefore, we are of the opinion that in respect of the disputed input services covered in those specific taxable services mentioned in Rule 6(5) ibid, the credit of the entire/whole amount of service tax paid on input services has to be allowed to the appellants, irrespective of the restrictions or conditions placed in Rule 6(3) ibid.
11E/87386/2017 10.1 On these disputed input services, though the appellants had claimed that these are eligible for availing CENVAT credit in terms of Rule 6(5) of the CCR, 2004, they had paid an amount of Rs.17,49,037/-, attributable towards CENVAT credit of input services used in relation to exempted goods, on 04.11.2010 vide Challan No.0001390; and interest payable on such delayed payment involving Rs.7,12,601/- vide Challan No. 1390 dated 04.11.2010 and Rs.6,37,951/- vide Challan No. 0002288 dated 14.12.2010, total interest payment of Rs.13,50,552/- and informed the same to the jurisdictional Commissioner vide their letter dated 16.12.2010 along with requisite Chartered Accountant's certificate. Therefore, they claimed that the CENVAT credit reversal attributable to input services used in or in relation to both dutiable and exempted final products for which the CENVAT credit was reversed by them, should have been considered by the jurisdictional Commissioner, even if such input services are treated by the department as being not covered under Rule 6(5) ibid, in terms of the retrospective amendment under the provisions of Section 73 of the Finance Act, 2010, for getting the dispute settled.
10.2 In order to address the above issue, the extract of the said legal provision under Section 73 of the Finance Act, 2010 is given below:
12E/87386/2017 10.3 On careful perusal of the aforesaid legal provisions, it transpires that the CENVAT Credit Rules, 2004 was amended retrospectively from 10.09.2004 to 31.03.2008 to provide for the benefit of allowing CENVAT credit to be reversed on proportionate basis, when common inputs or input services were used for the manufacture of dutiable and exempted products, 13 E/87386/2017 in order to end the disputes pending as on the date of enactment of the Finance Bill, 2010 or when the Finance Act, 2010 came into force. In the present case, the SCN was issued on 09.04.2010 and the said dispute was pending on the date of enactment of Finance Bill, 2010 on 08.05.2010.
Thus, the payment of the amount along with interest made by the appellants during November/December, 2010 and submitted to the jurisdictional Commissioner along with requisite documents, Chartered Accountant's certificate could have been subjected to such processes provided therein. It is not the case of the department that they had considered the case of the appellants with respect to the above payment of the amount along with interest and rejected the case as not fulfilling the conditions as provided under Section 73 of the Finance Act, 2010. Therefore, the said procedural simplification measures introduced in the Budget, 2010 as a part of the Finance Act, 2010 in resolving the CENVAT disputes should have been addressed by the department as provided therein and the impugned order extending such proceedings cannot stand the judicial scrutiny.
10.4 In this regard, we find that the Co-ordinate Bench of the Tribunal in the case of Commissioner of Central Excise, Goa Vs V.M. Salgaonkar & Brothers Private Limited - 2008 (10) S.T.R. 609 (Tri. Mumbai.) have held that if the services are covered under Rule 6(5) of the CCR, 2004, then the assessee is entitled to take entire amount of service tax paid on input services. The relevant paragraph of the said order dated 15.02.2008 is extracted and given below:
"6. It can be seen from the above reproduced portion of the order that the Commissioner (Appeals) has correctly come to the conclusion that credit of the service tax paid on the services as enumerated under Rule 6(5) of the Cenvat Credit Rules 2004 are to be allowed. It can be noticed that Rule 6(5) starts with a non obstante clause "notwithstanding", which would indicate that the provisions of Rule 6(3) are not applicable for the provisions of Rule 6(5) of Cenvat Credit Rules, 2004. If it is undisputed that the service tax credit availed is on the services as mentioned in Rule 6(5), the credit of the entire/whole amount of service tax has to be allowed to the respondent."
10.5 We further find that the Hon'ble High Court of Punjab & Haryana in the case of Principal Commissioner, CGST Commissionerate, Ludhiana Vs Suraj Solvents & Vanaspati Industries - (2023) 4 Centax 359 (P&H.) have held that even if the assessee had not moved any application to the department while reversing the proportionate credit, since they pursuing their legal remedies it 14 E/87386/2017 cannot be said that they had not complied with the requirements of retrospective amendment introduced to resolve the disputes of CENVAT Credit Rules, 2001/2002/2004. The relevant paragraphs of the said judgement dated 22.02.2023 are extracted and given below:
"9. In this case, the respondent reversed cenvat credit attributable to the common inputs used for manufacture of exempted final products by meeting with the requirement of scheme of Section 69 (2) of the Act, 2010 which was retrospective in nature and also paid interest thereon. The respondent was bonafidely prosecuting its remedy before the appropriate forums till the date of reversing the credit. No doubt, the application contemplated under section 69 (2) of the Act, 2010 had not been moved by it before reversing the credit, but in our opinion, in the light of amended provisions of Rules, 1944, it was not necessary to consider this contention on merits since the amended provisions covered such situations like the present one. In this regard, we place reliance upon the observations made by the High Court of Gujarat at Ahmedabad in Shree Rama Multi Tech Ltd. v. Union of India, 2011 (267) E.L.T. 153 wherein also the inputs were used in dutiable and exempted goods. No separate accounts were maintained. There was proportionate reversal of credit in view of retrospective amendment in the Act, 2010. It was held that the petitioners were not required to move any application as contemplated under section 69 (2) of the Act, 2010 as they had been bonafidely prosecuting the remedy before the High Court. Reliance can also be placed upon Commissioner of Central Excise, Salem-I v. Burn Standard Co. Ltd., 2013 (294) E.L.T. 389 (Mad.) wherein the assessee used a common input namely, furnace oil in the manufacture of dutiable goods as well as non-dutiable goods, on which, cenvat credit had been taken. A show cause notice was issued against it by the revenue as no separate accounts in respect of exempted goods and dutiable goods were maintained. The assessee had reversed the duty amount on the inputs in the manufacture of exempted items and did not claim any cenvat credit on the inputs used in the manufacture of goods for the subsequent months. The conditions in Section 73 (2) of the Act, 2010 were not complied by the assessee. It was held that even in the absence of compliance of such conditions within a period of six months, the claim of assessee was not to fail.
10. Undoubtedly, the respondent herein had not moved any application while opting to reverse the proportionate credit within six months of enactment of Finance Bill, 2010 along with documentary evidence and certificate from Chartered Accountant as required under Rule 57 CCC of the Rules. However, since all this happened during the pendency of the proceedings while the respondent had been still prosecuting its remedies, therefore, it cannot be stated that the respondent had not complied with the requirement of scheme of retrospective amendment of Section 69 (2) of the Act, 2010. As such, the learned Tribunal had rightly set aside the demand of the appellant of tax of 8% of value of exempted goods and we see no reason to allow the appeal. Accordingly, the same is dismissed. The substantial question of law as framed is decided accordingly."15
E/87386/2017
11. In view of the foregoing discussions and analysis, we are of the considered view that the impugned order in confirmation of the CENVAT demands along with interest and imposition of penalty on the appellants is liable to be set aside, as the same does not stand the legal scrutiny.
12. In the result, by setting aside the impugned order, the appeal is allowed in favour of the appellants.
(Order pronounced in open court on 24.03.2026) (S.K. MOHANTY) MEMBER (JUDICIAL) (M.M. PARTHIBAN) MEMBER (TECHNICAL) Sinha