Custom, Excise & Service Tax Tribunal
Central Up Gas Ltd vs Cgst & Ce Kanpur on 4 June, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.51953 of 2015
(Arising out of Order-in-Original No.KNP-EXCUS-000-COM-026-14-15 dated
30/01/2015 passed by Commissioner (Appeals) Customs, Central Excise &
Service Tax, Kanpur)
M/s Central UP Gas Ltd., .....Appellant
(7th Floor, UPSIDC Complex,
A-1/4, Lakhanpur, Kanpur-208024)
VERSUS
Commissioner of Customs, Central Excise &
Service Tax, Kanpur ....Respondent
(Lucknow) APPEARANCE:
Shri Atul Gupta, Advocate for the Appellant Shri Manish Raj, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70307/2024 DATE OF HEARING : 06 February, 2024 DATE OF PRONOUNCEMENT : 04 June, 2024 SANJIV SRIVASTAVA:
This appeal is directed against order in original No KNP- EXCUS-000-COM-026-14-15 dated 30.01.2015 of the Commissioner Central Excise and Service Tax Kanpur. By the impugned order following has been held:
"ORDER
(i) I confirm the demand of amount of Rs. 8,23,01,521.00 (Rs Eight Crore Twenty Three Lakh One Thousand Five Hundred and Twenty One only) against value of exempted services of Rs 1,37,16,90,114.00 and order for recovery of the said amount from them under the 2 Excise Appeal No.51953 of 2015 proviso to sub Section (1) of Section 73 of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of Cenvat Credit Rules, 2004 also order for appropriation of amount of Rs.76,922/- and Rs.2,10,355/- deposited by the party as reversal of credit towards payment of amount.
(ii) I also confirm the demand of Interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994. I also order for appropriation of amount of Rs.46903/- and Rs. 3,457/- deposited by the party as interest.
(iii) I impose a penalty of Rs. 200/- (Two Hundred only) per day from the first day when the party was required to take registration till the date party takes registration under Section 77(1)(a) of the Finance Act, 1994, for violation of provisions of Rule 4 of Service Tax Rules, 1994 read with Section 69 of the Finance Act, 1994 Finance Act, 1994, and Rules made there-under.
(iv) I impose a penalty of Rs. 10000/- under Section 77(1)(b) of the Finance Act 1994, for violation of provisions of Rule 5 of Service Tax Rules, 1994 and the provisions of Finance Act,1994.
(v) I impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77(1)(c) of the Finance Act, 1994, for violation of various provisions of Finance Act, 1994, and Rules made there-under, in as much as, the party failed in timely furnishing of the desired information
(vi) I impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77(1)(d) of the Finance Act, 1994, in as much as, the party failed to deposit the service tax within stipulated time limit in a manner as provided under Rule 6 of Service Tax Rules,1994 read with Section 68 of the Finance Act, 1994.
(vii) I impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77(2) of the Finance Act, 1994, for 3 Excise Appeal No.51953 of 2015 violation of provisions of Rule 7 of Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994. Finance Act, 1994 and Rules made there-under.
(viii) I also impose a penalty of Rs. 8,23,01,521.00 (Rs.
Eight Crore Twenty Three Lakh One Thousand Five Hundred and Twenty One only)upon the aforesaid party, under Section 78 of the Finance Act, 1994, read with Rule 15 of the Cenvat Credit Rules, 2004.
(ix) I do not impose penalty under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994, on account of the period under consideration being from 10"h May 2008 onwards."
2.1 Appellant is engaged in the manufacture of dutiable goods viz. the manufacture of CNG as well as are engaged in providing exempted services viz. trading of PNG. They were availing Cenvat Credit facility as per Central Excise Rules, 2004 on input services.
2.2 During the course of scrutiny of records, it was found that the party was not maintaining separate records/inventory for the inputs/ input services. It was observed that they were availing Cenvat Credit on the input services like Rent-a-cab, Consultancy services, Transportation of Goods through Pipelines etc, but they did not maintain any separate accounts for receipt and their use in or in relation to manufacture of dutiable final products and for exempted services, as provided in Rule 6 of Cenvat Credit Rules, 2004.They also did not exercise the option of proportionate reversal of Cenvat credit as provided under Rule 6(3A) of the CER,2004.
2.3 A show cause notice dated 06.05.2014 was issued to the appellant asking them to show cause as to why:
(1) The amount of Rs. 8,23,01,521.00 (Rs Eight Crore Twenty Three Lakh One Thousand Five Hundred and Twenty One only) against value of exempted services of Rs 1,37,16,90,114.00 should not be demanded and 4 Excise Appeal No.51953 of 2015 recovered from them in terms of the provisions of Section 73 (1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of Cenvat Credit Rules, 2004 and the amount of Rs.2,87,277/- deposited voluntarily by the party aginst the aforesaid dues should not be appropriated.
(2) Interest as applicable during the relevant period should not be recovered from them under the provisions of Section 75 of the Finance Act, 1994 read with Rule 6 of the CENVAT Credit Rules, 2004 and interest of Rs.50,360.00/- deposited by the party should not be appropriated.
(3) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 read with Rule 15 of the CENVAT Credit Rules, 2004 for the contravention of Rule 6 (2) and 6 (3) of the CENVAT Credit Rules 2004 in the instant case.
(4) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994 for the various contraventions as discussed in aforesaid paras. (5) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 read with Rule 15 of the CENVAT Credit Rules, 2004 for the reasons discussed in aforesaid paras.
2.4 The show cause notice has been adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellant and Shri Manish Raj, Authorized representative for the revenue.
3.2 Arguing for the appellant, learned counsel submits that,-
Demand is partially time barred in terms of Section 73 (1) of the Finance Act, 1994 as in the facts of the present case extended period could not have been invoked. Once the credit is reversed that tantamount to non availment of credit.
5 Excise Appeal No.51953 of 2015o Chandrapur Magnet Wires (P) Ltd. [1996 (81) ELT 3 (SC)] o Bhel-GE Gas Turbine Services Pvt Ltd [2021 (44) GSTL 399 (T-Hyd)] The fact that no credit attributable to the PNG was taken has been disputed in the impugned order.
The procedure under Rule 6 (3A) was not mandatory and its infraction do not entail raising of disproportionate demand.
o Star Agriware Hosing and Collateral management Ltd [2020 (10) TMI 198] For not exercising the option under Rule 6 of CCR, option of payment of 6%/ 8% cannot be thrust upon the appellant.
o Tiara Advertising [2019 (30) GSTL 474 (Tel)] o Agarwal Metal Works Pvt Ltd. [2022 (7) TMI 924] Trading was not an exempted service prior to 01.04.2011 o Trent Hypermarket Ltd [2019 (6) TMI 1327- CESTAT Mumbai] o Lenovo India Pvt Ltd. [2021 (11) TMI 899 CESTAT Bangalore] 3.3 Learned authorized representative re-iterates the findings recorded in the impugned order.
4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments.
4.2 Impugned order records following findings on the merits of the case:
"69. Now, I observe that in this case, following main points merit decision:
I. Whether the amount of Rs. 8,23,01,521.00 is demandable and recoverable from them in terms of the provisions of Section 73(1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3) (i) of Cenvat Credit Rules, 2004 and the amount of Rs.6 Excise Appeal No.51953 of 2015
2,87,277.00 deposited voluntarily by the party is liable for appropriation.
II. Whether interest as applicable during the relevant period is recoverable from them under the provisions of Section 75 of the Finance Act, 1994 read with Rule 6 of Cenvat Credit Rules, 2004.
III. Whether penalty is liable to be imposed upon them under Section 76 of the Finance Act 1994 read with Rule 15 of the Cenvat Credit Rules.
IV. Whether penalty is liable to be imposed upon them under Section 77 of the Finance Act.
V. Whether penalty is liable to be imposed upon them under Section 78 of the Finance Act, 1994. 1994 read with Rule 15 of the Cenvat Credit Rules, 2004
70. At first, I take up the said issues mentioned at no. (i) above. It is a settled principle that Cenvat Credit is not available, if input or input services are used in the manufacture of exempted goods or provisions of exempted output services. As a natural corollary, if no duty is payable on final product or output service, credit of duty paid on input or input services cannot be availed
71. The party has taken credit of input services used in or in relation to manufacture of dutiable goods as well as exempted service contrary to the provisions of Rule 6 of the Cenvat Credit Rules,2004.
72. I have gone through the exact provisions of Rule 6 with effect from 01.04.2004 i.e.the date of notification of Cenvat Credit Rules, 2004, and the changes made subsequently up to enactment of the Finance Act, 2010. The provisions of Rule 6 of the Cenvat Credit Rules 2004, are explicitly clear; Sub Rule 1 of Rule 6 states that Cenvat Credit is not allowable on such quantity of input/input services which are used in the exempted goods. As per Sub-Rule 2 of Rule 6 of Cenvat Credit Rules 2004, the manufacturer or provider of output service has to maintain separate inventory of the input and input services, which implies that no quantity of 7 Excise Appeal No.51953 of 2015 input/raw material on which Cenvat Credit was taken should be used in the manufacture of exempted goods. The Rule provides two options to the manufacturer of both dutiable and exempted products, one is to keep separate account of inputs used for both the products; the other is to pay an amount at the appropriate % of the value of exempted products as prescribed in the Rules
73. I observe that the condition to maintain separate accounts of receipt, consumption and inventory is a strict obligation, and no leniency can be allowed on account of conditions/ procedure laid down in law, and failure to comply would attract recovery and penal provision as prescribed. The words used in the rules are "the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input services meant for use in the manufacture of dutiable final products r in providing output services and quantity of input meant for use in the manufacture of exempted goods or service. Thus it is a strict liability of the manufacturer and burden to prove also lies upon them that they fully discharged their liability.
74. I find that the party has contended that they were maintaining separate record as per Rule 6 of Cenvat Credit Rules, 2004 by opting one of the options provided in said Rule. They contested that the Natural Gas being received are deciphered in supply/ Gas wise ledger with marking "RLNG, Mid-Term, Spot-RLNG, NG & PMT". The gas received from suppliers in bills and is marked as Natural Gas and PMT, in the ledger maintained These are the gas which is used solely for producing CNG and therefore, alleging that they were not maintaining any separate records is wholly baseless and contrary to the facts on record. Further, they submitted that the Rule 6(2) of the Cenvat Credit Rules 2004 merely requires maintenance of separate books of accounts for receipt and use of input services, in or in relation to the manufacture of the dutiable goods or the taxable output services and the ledger being maintained by them would clearly prove the 8 Excise Appeal No.51953 of 2015 maintenance of proper records of receipt and use of the input services, that is NG/PMT (APM) and the other Natural Gas. Besides they were maintaining proper dispenser wise records of quantity of CNG gas being sold from each of the CNG station
75. I observe that the departmental allegation is very specific as it says that the party is manufacturing CNG, a dutiable product and paying appropriate duty. At the same time they are trading PNG which is exempted service under Rule 2(e) of the Cenvat Credit Rules,2004 by virtue of Circular No.943/4/2011- CX dated 29.04 2011. The party has taken credit on services like Rent-a-cab, consultancy services, transportation of goods through pipe lines etc., which were used for both types of products. Party has not maintained separate accounts of these inputs services in respect of receipt and use in the dutiable goods as well as for exempted service. I find that the party on the other hand emphasized on the procedure of receipt and further use of natural gas and accounting of natural gas maintained by them. I observe that the party throughout their defence has not mentioned even a single record maintained for receipt and use of inputs as alleged in the show cause notice. They failed to produce any such separate accounts though sought for explicitly, The party also failed to produce any evidence that the quantity of input services on which credit alleged to have been availed is used exclusively in or in relation to the manufacture of dutiable final product (CNG).
76 I also notice that the party in their defense has also stated that they have elaborately detailed the entire working within their organizations BPCL/GAIL and has submitted documentary charts showing that they had undisputedly taken credit of input service to the extent they are used in the manufacture and sale of CNG on payment of duty. Further, the party claimed that they are ready to file an affidavit verifying the fact that no Cenvat credit towards input services was either availed or utilized in relation to receipt and sale of 9 Excise Appeal No.51953 of 2015 PNG. I notice that at the same time party has also claimed that they maintained separate accounts for receipt and use of input services in or in relation to manufacture of dutiable final products and for provision of exempted service. I find that these two defence contentions are contrary to each other. Thus, to my mind all these contentions of the party are after thought to cover up their misdeeds. Moreover their contention has not been supported by any evidence such as list of records maintained by them which is mandatory required to be submitted to the department.
77. In the instant case, I find that the party was maintaining records in respect of supply of Natural Gas. They have detailed the manner and process of supply of gases by GAIL/BPCL through pipeline and stages where such gases are used or taken for use by them for producing CNG at various CNG stations. The remaining gas in the pipelines is supplied to other users as PNG. M/s GAIL/BPCL in fact releases the gas from their base point, i.e. Hazira to GAIL through pipeline and from GAIL to tap up point of the party in the form of Natural Gas (NG) which passes through their own gas pipeline and reaches to the pipeline owned by the CUGL at their respective stations that is at Fazalganj and Chakeri in Kanpur. Total receipts of gas is first measured at TAP up point at Fazalganj/ Chakeri and accounted for as purchases in the accounts of the party. From Fazalganj and Chakeri the said NG further routes to various CNG stations of the party where the compressor/dispenser are installed. The compressor/dispenser is the machine required for producing CNG and distributing or supplying the same to the consumer. At the CNG stations such gas immediately gets converted into CNG by use of compressor and is sold to ultimate consumer through dispenser. This is the stage where the measurement of gas takes place, both for the quantity of NG purchased and the quantity sold as CNG to the consumers. Therefore, the process as explained by the party itself establishes that from GAIL, NG is supplied to the stations of CNG through pipeline, 10 Excise Appeal No.51953 of 2015 from where such natural gas after being compressed, is sold to consumers through dispenser and there is no means to measure the NG. But the moment CNG is supplied to the consumer and is transmitted through the meter, the quantity of gas being received and subsequently converted into CNG and sold to ultimate consumer is determined. The purchase and the sale simultaneously take place as soon as Natural Gas, duly compressed, known as CNG is supplied to the consumer and is transmitted through the meter. It is the stage where measurement of gas takes place and the party makes payment of that quantity of the gas to the ultimate seller i.e, GAIL/BPCL and accounts for in ledger as the quantity received The party has stated that the remaining gas in pipelines is supplied to other users as PNG.
78. In my opinion, in such a process as detailed by them, it is impossible to co-relate the quantity of inputs service i.e. Transportation of Goods through Pipelines, consumed in the manufacture of finished goods, especially when the party was maintaining record of manufacture of CNG only, when it is transmitted to the meter and receipt/purchase simultaneously take place with the supply. I find that the party has stated that the said quantity is recorded as APM and rest of the gas is always accounted for as the NG. In this context they have also submitted a copy of the ledger account "Cenvat Credit receivable" and their contention is that this ledger account solely pertains to the input services used for producing CNG at CNG stations only. The remaining quantity of natural gas is sold /traded as PNG. I observe that by this methodology the party were recording the quantity of gas used for manufacture of CNG and they claim to have taken credit on that part of consumption of Gas only. In my opinion even if the party is taking credit on this part only and leaving the rest of credit as unutilised in respect of PNG, the condition laid down in Rule 6 is not fulfilled. Further, I also observe that the party has nowhere submitted the maintenance of separate records in respect of other 11 Excise Appeal No.51953 of 2015 services as mentioned in the Show Cause Notice such as Rent-a-Cab, Consultancy services etc. This leads to my firm conviction that they were not maintaining any such record and in this way, they had not complied with the provisions of Rule 6(2) of the Cenvat Credit Rules 2004.
79. l observe that the party also claimed that they opted for the provisions of Rule 6/(3A) of Cenvat Credit Rules, 2004 for the period April, 2009 to December, 2010 and the same was duly exercised The party has submitted that they had reversed the Cenvat credit of Rs 76,922/- taken on seven invoices of M/s GAIL (India) Limited related to PNG trading for the period April‟2010 to October‟2010 The sum of Rs 76,922/- alongwith interest of Rs. 46.903/- (total Rs. 1,23,825/-) have been reversed vide challan No. 209 dated 12.11.13 as prescribed under Rule 6(3A) of the CENVAT Credit Rules 2004. The department, on the other hand has alleged that the payment as reversal of Cenvat credit has been made in a manner other than as provided in the Rules
80. I have also gone through the amended provisions of the law with regard to above submissions. I notice that a detailed procedure has been laid down for calculation and reversal of amount on account of proportionate basis. The procedure as per sub-rule 3(A) of Rule 6 is as under:-
(3A) For determination and payment of amount payable under clause (i) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions-
(a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the prescribed particular.
(b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month.12 Excise Appeal No.51953 of 2015
(c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the prescribed manner.
81. From the above it is clear that with the insertion of Sub-Rule (3) read with the procedure for reversal in sub-rule (3A), it became mandatory for the manufacturer to abide by the law and to follow the procedure as laid down. I also find that the primary requisites of the law begins with intimation to the jurisdictional Superintendent as provided under Rule 6 (3A) (a) and to reverse the credit attributable to input/input services used in or in relation to the manufacture of exempted product to determine and pay, provisionally, for every month as per Rule 6 (3A) (b). The procedure for annual reconciliation has been prescribed in Rule 6 (3A) (c).
82. I find that the party had reversed the amount of Rs 76,922/- alongwith interest of Rs 46.903/- (total Rs. 1,23,825/-) for the period April, 2010 to October, 2010 on their own, without observing the procedure laid down In law. They failed to submit intimation to the jurisdictional Superintendent as provided under Rule 6 (3A) (a). They further failed to reverse the credit attributable to input/input services used in or in relation to the manufacture of exempted product, provisionally, on monthly basis as per Rule 6 (3A) (b) of the said Rules. Therefore, in my opinion by merely reversing an amount at some point of time cannot be treated as „the option availed‟ by the party. In view of the above facts I find that the party has not followed the conditions/ procedure as laid down in the Rule 6 even after the insertion of sub-rule 3 and 3(A)
83. This view also finds support from the various citations relied upon by the department while framing the allegations against the party. In the case of Commissioner of C. Ex. Thane-I V/s M/s Nicholas Piramal (India) Ltd.
13 Excise Appeal No.51953 of 2015[2009(244) E.L.T.321(Bom.)), the Hon‟ble High Court, Mumbai has held that:-
"Cenvat/Modvat - Inputs, common inputs used in dutiable and exempted goods - Tribunal Larger Bench not right in allowing reversal of credit on inputs instead of payment of 8% or 10% of price of exempted goods as per rules - Rule 57C or Rule 57CC of erstwhile Central Excise Rules, 1944 not considered by Supreme Court in 1996 (81) E.L.T. 3 (S.C.) and ratio therein not applicable to construe Rule 6 of Cenvat Credit Rules, 2002 (now Rule 6 of Cenvat Credit Rules, 2004) - Hardship in maintaining accounts or following rule not makes rule absurd or unjust - Difficulty realized and presumptive tax provided in rules - Rule 6(2) ibid mandatorily applicable once dutiable and exempted final products manufactured from common inputs and credit can be availed only in terms of Rule 6(3) ibid - Credit admissible only as per method prescribed and assessee not having choice of claiming or reversing credit - Impugned order holding payment of 8% or 10% amount not required if credit reversed on inputs used in exempted goods, not agreed with - Rule 57CC of erstwhile Central Excise Rules, 1944."
84. And in the para 13 of the aforesaid judgment, it was held by the Hon‟ble High Court, Bombay that-
"13. On a consideration of Rule 57CC, it is clear that if inputs are used in the manufacture of goods, which are chargeable to duty as well as exempted goods such manufacturer shall pay an amount equal to eight percent of the price (excluding sales tax and other taxes, if any payable 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 unless the manufacturer in terms of sub Rule (9) maintain separate inventory and accounts of the receipts and of use of inputs in the manufacture of exempted goods. This rule as both the explanatory note to the Finance Bill and the Budget 14 Excise Appeal No.51953 of 2015 speech was introduced on the realization that the procedure was cumbersome and it was difficult to determine whether the reversal of credit was proper or not. The delegate making the rule as also the Finance Minister were aware of the practical difficulties faced by the Industry.
Thus if the manufacturer uses inputs in respect of both, manufacture of exempted goods and dutiable goods, then if a separate inventory is maintained for receipt and use, the manufacturer in respect of dutiable goods could take credit of the specified duty paid on such inputs, otherwise pay 8% of the price in terms of Rule 57CC."
85. I would also like to place reliance on case laws detailed as under, which further consolidate that in case no separate inventory is maintained for receipt, consumption of inputs used in the manufacture of dutiable/exempted product, manufacturer shall be liable to pay „amount‟ as per the prescribed rate on the value of exempted goods cleared
(i) M/s Shreyans Industries Ltd. V/s Commissioner of Central Excise, Jalandhar reported in 2008(232)ELT 291(Tri.-Del.) in the Stay Order No. 665/2008-EX(PB), dated 26-6-2008 in Application No. E/Stay/1086/2008 in Appeal No. E/1108/2008 holding that-
Stay/Dispensation of pre-deposit - Cenvat/Modvat - Inputs commonly used for both exempted and dutiable final goods
- Assessee used inputs for exempted final products which are cleared based on end-use - Since inputs were stored together, accounts maintained by them were held to be not reliable and not co-relatable to actual use of inputs for exempted goods - If 10% of amount is paid on such exempted goods, they are eligible to take credit remaining with them, such submission prima facie acceptable - Assessee having not made a prima facie case for full waiver, directed to deposit an amount of Rs. 65 lakhs within 12 weeks from date of order - Subject to said deposit, balance of duty stands waived - Rule 6 of Cenvat 15 Excise Appeal No.51953 of 2015 Credit Rules, 2004 - Section 35F of Central Excise Act, 1944. [para 5]
(ii) M/s Ghodawat Foods International Pvt. Ltd. Vs. C.Ex. Pune reported in E.L.T, 2008 (229) ELT 261 (Tri.-Mumbai)- Final Order No. A/384/2008-WZB/C-li/(SMS), dated 15-4-
2008 in Appeal No. E/700/2007 reported in 2208(229)ELT261(Tri-Mumbaia) holding that-
Demand and penalty - Cenvat/Modvat - Common Inputs used in manufacture of exempted as well as dutiable final product - Separate account not maintained - 10% amount of the exempted products cleared from the factory manufactured by using such inputs payable - Demand upheld - However, credit having not been taken with intention to evade payment of duty, penalty under Rule 15 of Cenvat Credit Rules, 2004 unwarranted - Rule 6 ibid. [paras 8, 10, 11]
(iii) Ms Bharat Heavy Electricals Ltd. V/s Commissioner of Cus. &C.Ex. Bhopal reported 2003 (160) E.L.T. 928 (Tri. - Del.)-Final Order No. A/316/2003-NB (C), dated 24- 6-2003 in Appeal No. E/1788/2001-NB(C) holding that:-
Cenvat/Modvat - Modvat on inputs - Credit availed on inputs used for manufacture of conditionally exempted final product - No separate inventory and accounts maintained in respect of use of inputs in relation to manufacture of exempted final product - Appellants liable to pay an amount equal to 8% of the price of exempted final product at the time of its clearance as per Rule 57CC(1) of erstwhile Central Excise Rules, 1944 - However, such amount not payable in respect of period prior to insertion of Rule 57CC ibid. [para 5]
(iv) M/s Eastern Medikit Ltd. V/s Commissioner of Central Excise,Gurgaon reported in 2009(242)ELT51(Tri.-Del.) Final order No. 442/2009-SM(BR)(PB), dated 13.5.2009 in appeal No. E/. 1897/2005-SM holding that;-
"Penalty - Cenvat/Modvat, wrong availment of - Cenvat/Modvat credit availed on common inputs used in 16 Excise Appeal No.51953 of 2015 dutiable and exempted goods - Separate record or separate inventory of inputs not maintained - Though plea that Cenvat credit on inputs used in exempted goods not taken, but no documents in this regard produced - Liability to pay 8% not disputed ----"
The party has also cited number of decision in the cases in support of their contention but they do not squarely apply to the facts, circumstances and the law involved in the present case, hence cognizance of the same would deviate the examination of main issues under consideration.
86. In the light of above facts, I am of the considered opinion that the party has not followed the conditions/procedure as laid down in the Rule 6, even after the amendment in the Cenvat Credit Rules, 2004, and therefore, confirm the 'amount of Rs.8,23,01,521.00 and the same is demandable and recoverable from them. also find that the party has deposited an amount of Rs.76922/- and Rs.2,10,355/- against the excess credit taken which is liable to be appropriated along with the amount of interest of Rs.46903/- and Rs.3,457/- deposited by them vide challan No. 209 dated 12.11.2013 and Challan No. 00142 dt. 11.07.2011, respectively."
4.3 In case of Indraprasth Gas Limited [Final Order No 57931/2017 dated 14.11.2017] Delhi Bench in identical case while dismissing the appeal filed by the revenue, observed as follows:
"2. The brief facts of the case are that the respondent- assessee is engaged in the activity of manufacture of compressed natural gas (CNG) falling under Tariff Item 2711 21 00 of the First Schedule to the Central Excise Tariff Act, 1985 and clears the same on payment of duty. Respondent also purchases Piped Natural Gas (PNG) from various manufacturers like Gas Authority of India Ltd. (GAIL) and sells the same as it is. Thus, the respondent is engaged in the manufacture of dutiable goods (CNG) as well as in trading 17 Excise Appeal No.51953 of 2015 activity of the dutiable goods (PNG). During the period under consideration, the credit was availed by the respondent on various input services exclusively used for manufacturing activity and common input services used for manufacturing as well as trading activity. The department opined that the respondent has not maintained separate accounts in respect of the common input services utilised by them nor had they opted for the option under Rule 6(3)(ii) of the Credit Rules, by following the procedure in that regard. Accordingly, the audit was of the view that the respondent is liable to pay amount @ 6% of the exempted service, in terms of Rule 6(3)(i) of the Credit Rules.
3. With this background, we heard Sh. H.C. Saini, ld. AR for the Revenue who submits that Revenue has relied on the show cause notice. He submits that the respondent -assessee has neither intimated the department regarding its value in their ER-1 and ST-3 return.
4. On the other hand, Sh. Amit Jain, ld. Advocate for respondent-assessee submits that the respondent has reversed the proportionate credit pertaining to the common input services, for all the years. The same was informed to the department vide several correspondences. He further submitted that since the respondent-assessee has reversed the proportionate credit of common input services availed towards manufacturing as well as trading activity, demand of 5%/ 6% under Rule 6(3)(i) is not sustainable. Further, vide letter dated 29.02.2016, respondent-assessee informed the Department that it had reversed the total common input services credit taken by it for financial year 2013-14 & 2014- 15, on a suo motu basis. Vide their letter dt. 06.04.2016, respondent - assessee intimated the department of further reversal of an amount for Rs. 11,44,422/- for financial year 2014-15. Lastly, he made a request to dismiss the appeal filed by the Revenue.
5. After hearing both the parties and on perusal of record, it appears that the identical issue has come up before the 18 Excise Appeal No.51953 of 2015 Tribunal in the case of CST vs. Machine Tools (I) Pvt. Ltd. - 2017 (8) TMI 833-CESTAT New Delhi where it was observed that-
"6. We find that the Cenvat Credit Scheme is available only in respect of an assessee, who is either manufacturing dutiable final products or providing taxable output service. Admittedly, during the relevant time, trading is not categorised as service at all. It is only in 2011, the explanation was inserted under Rule 2(e) of CCR, 2004 to the effect that "exempted service"
includes "trading". Prior to that date, trading is not even considered as "exempted service". Going by this fact, it is clear that no credit is available on any "input service"
attributable to "trading" during the material time. When no such credit is eligible, the respondent cannot avail the benefit of cenvat credit scheme. Having availed the credit on common input services, without maintaining separate accounts, it is not open to the respondent to claim that there is no need for reversal of proportionate credit attributable to their activity of trading. If trading is not to be considered as an "exempted service" (or service at all) then the cenvat credit scheme itself is not available to a trader. The respondent, being a trader as well as output service provider, has availed credit on common input services. Their failure to maintain separate accounts cannot give them an advantage of taking full credit on all common input services. This will have effect of nullifying the very principle that no credit is available when there is no taxable output service. In other words, it is very clear that the respondent is eligible to take credit on only such input services, which are attributable to taxable output services. If there are common input services, without separate accounts, it is necessary for the respondent to avail so much of credit only, which are attributable to the taxable output service. This can be enforced by way of reversal of credit attributable to trading activities. We find that the legal position has been examined and decided by the Tribunal in Mercedes Benz India Pvt. Ltd. - 2014 (36) STR 704 (Tri. Mum.). The said decision 19 Excise Appeal No.51953 of 2015 was affirmed by the Hon‟ble Bombay High Court reported in 2016 (41) STR 577 (Bom.) and SKF India Ltd. (ISD) - 2016 (44) STR 61 (Bom.)".
6. Similarly, the issue was dealt with by the Tribunal in the case of Dalmia Bharat Sugar & Industries Ltd., vs. CCE -2017- TIOL-113-CESTAT-DEL where it was observed that-
"8. We find that the coordinate Bench of this Tribunal in the case of Mercedes Benz India Pvt. Ltd. v. C.C.E., Pune I 2015 (40) STR 381 (TriMum.) has held that the condition given in Rule 6(3A) to intimate the Department is only procedural matter and the delay of such procedural matter is condonable and therefore, substantive right given in the said Rule cannot be denied for such procedural lapse. The Tribunal has also held that Commissioner cannot insist that assessee should reverse only as per Rule 6(3)(i) but it is the option of the assessee. Tribunal in that case held that as follows: 5.3 As regard the contention of the adjudicating authority that this option should be given in beginning and before exercising such option, we are of the view that though there is no such time limit provided for exercising such option in the rules but it is a common sense that intention of any option should be expressed before exercising the option, however the delay can be taken as procedural lapse. We also note that trading of goods was considered as exempted service from 2011 only, thus it was initial period. We are also of the view that there is no condition provided in the rule that if a particular option, out of three options are not opted, then only option of payment of 5% provided under Rule 6(3)(i) shall be compulsorily made applicable, therefore we are of the view that Revenue could not insist the appellant to avail a particular option. In the present case admittedly it is appellant who have on their own opted for option provided under Rule 6(3)(ii). The meaning of the option as argued by the Ld. Sr. Counsel is that option of right of choosing, something that may be or is chosen, choice, the act of choosing. From the said meaning of the term option, it is clear that it is the appellant who have liberty to decide 20 Excise Appeal No.51953 of 2015 which option to be exercised and not the Revenue to decide the same.
9. In the light of the above decision of the coordinate Bench we find that the Commissioner is not justified in insisting that appellant reverse cenvat credit in terms of Rule 6(3)(i) of Cenvat Credit Rules. The claim of the appellant is that they have already reversed on proportionate basis, the cenvat credit along with interest amount payable in terms of Rule 6(3A). However, the Department is entitled to verify whether reversal of the amount already made by the appellant satisfies the requirement of Rule 6(3)(ii) notwithstanding the fact that the procedural formalities have not been satisfied. For this purpose, we remand the matter to the original authority to carry out verification."
7. By following our earlier orders (supra), we find no reason to interfere with the impugned order, the same is hereby sustained alongwith the reasons mentioned therein."
4.4 Appellant counsel have during course of argument cited number of decisions which we do not find necessary to deal with as the issue involved in the present appeal is squarely covered by the above decision of Delhi Bench. We do not find any merits in the impugned order.
5.1 Appeal is allowed.
(Order pronounced in Court on- 04 June, 2024) (P.K. CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp