Custom, Excise & Service Tax Tribunal
M/S Neuland Laboratories Ltd vs Commissioner Of Central Excise, ... on 5 September, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE COURT I Appeal Involved: E/563/2012-SM [Arising out of Order-in-Appeal No.101/2011 (H-I) CE dated 21/11/2011 passed by Commissioner of Customs, Central Excise & Service Tax (Appeals-I), Hyderabad] E/St/25728/13 in E/25540/2013 [Arising out of Order-in-Appeal No.131/2012 (H-I) CE dated 25.10.2012 passed by Assistant Commissioner of Service Tax (Appeals-I), Hyderabad] M/s Neuland Laboratories Ltd. Appellant Versus Commissioner of Central Excise, Hyderabad I Respondent
Appearance:
None For the Appellant Mr. Gurunathan, Addl. Commissioner (AR) and Mr. S. Teli, Dy. Commissioner (AR) For the Respondent Date of Hearing: 06/08/2013 & 12/08/2013 Date of Decision: .. CORAM:
HON'BLE SHRI B.S.V. MURTHY, TECHNICAL MEMBER Final Order Nos. 25797/2013 & 26315/2013 Since both the appeals are filed by the very same assessee and the issues involved in both the appeals are same, I proceed to pass a common order even though these appeals were heard on different dates (06/08/2013 & 12/08/2013).
2. None was present on behalf of the appellant. However, the appellant filed written submissions in each case and requested the Bench to decide the appeals on merits.
3. The appellants are engaged in the manufacture of Bulk Drugs and intermediaries falling under Chapter 29 of the First Schedule to the Central Excise Tariff Act, 1985. They purchased Ethanol (un-denatured) manufactured by M/s. Andhra Sugars Ltd. which was cleared by the supplier on payment of duty. The duty so-paid was availed as CENVAT credit. Ethanol (un-denatured), according to the Revenue, was classifiable under Chapter 2204.90 up to 28/02/2005 attracting nil rate of duty and with effect from 01/03/2005, there was no specific chapter heading for the said product ethanol (un-denatured) implying that the product was non-excisable with effect from 01/03/2005. Taking a view that the amount paid by M/s. Andhra Sugars Ltd. did not represent excise duty leviable under Section 3 of the Central Excise Act, 1944 and therefore credit availed by the appellant was in contravention of Rule 3 of CENVAT Credit Rules, 2004(CCR), proceedings were initiated against the appellant which have culminated in the impugned order wherein the Commissioner (Appeals) upheld the orders of the original authority demanding CENVAT credit of Rs. 4,49,698/- with interest and penalty equal to the CENVAT credit wrongly availed.
4. After hearing learned Authorised Representative (AR) on behalf of Revenue and going through the records including written submissions filed by the appellant, I find that the issue is no longer res integra and there are several decisions taking a view that the assessing officer in-charge of the assessee who has taken the credit cannot sit in judgment as to whether the duty was payable or not on the goods supplied. What is required to be examined is whether duty has been paid or not and if duty has been paid by the supplier/assessee, the receiving assessee cannot be found fault with if he takes CENVAT credit of the duty paid so long it is used as input and CENVAT credit is admissible. I find that the decision of Honble High Court of Madras in the case of Commissioner of Central Excise, Chennai-I vs. CEGAT, Chennai [2006 (202) ELT 753 (Mad.)] is applicable to the facts of this case. In that case, the Honble High Court came to the conclusion that Rule 57A(1) of Central Excise Rules, 1944 provides for availment of CENVAT credit of duty paid and not payable. The High Court observed that this distinction is very important and which indicates that what is to be taken into account is the factual state of affairs. Thereafter, the Honble High Court observed that once the duty has actually been paid on the raw material, the credit is admissible. In this case also, it is not the case of the Revenue that duty was not paid. Therefore, the decision of the Honble High Court of Madras is clearly applicable to the facts of this case. Even the amended CENVAT Credit Rules have similar provisions and provide for CENVAT credit of duty paid on inputs and therefore the appeal has to be allowed.
5. At this stage learned AR submits that the decision of the Honble High Court of Madras would not apply to the present case. According to Rule 3, a manufacturer/producer of final products shall be allowed to take credit of duty of Excise specified in the First Schedule to the Central Excise Tariff Act leviable under Central Excise Act. He submits that in respect of other duties also similar clauses have been incorporated in Rule 3 wherein the Schedule where the clause to be specified is mentioned. After introduction of Eight Digit Tariff in 2005, Ethyl Alcohol un-denatured (potable liquor) no longer figures in the Tariff at all. Therefore, during the relevant time Ethyl Alcohol (Ethanol) was not covered under any heading in the First Schedule and it cannot be treated as excisable at all. Since credit can be availed on the Excise duty paid in respect of the goods in the First Schedule to the Central Excise Tariff Act, the credit cannot be taken and this aspect is required to be considered.
6. I have considered these submissions carefully. According to Rule 6 of the Central Excise Rules, 2002, the assessee shall himself assess the duty payable on excisable goods. Assessment involves classification of the goods, determination of rate of duty, determination of quantum of duty and payment thereof. This requirement has to be fulfilled by the assessee who is responsible to make the payment of duty. For this purpose, he has to determine the duty payable. As observed by Honble High Court of Madras, there is no such obligation on the person who receives the goods and avails the CENVAT credit. He is eligible to take CENVAT credit of duty paid which is specified in the First Schedule to the Central Excise Tariff Act. What is to be noted as observed by the Honble High Court is the fact that he is not required to determine the duty payable since what is provided in Rule 3 is that he shall be eligible to take credit of the duty paid. He is not required to determine the duty payable which is a part of assessment and is required to be done by the supplier of the goods. If the arguments advance by learned AR are accepted, the duty payable is also to be determined by the receiver of the goods and he has to determine that aspect first and then take credit, the assessee is required to assess all the goods/services received which is definitely not contemplated by the statute. This aspect is considered along with the provisions of Rule 9 of the CENVAT Credit Rules. Sub-rule (5) of Rule 9 provides that manufacturer has to maintain proper records for receipt, disposal, consumption and inventory of capital goods/inputs in which relevant information regarding the value, duty paid, CENVAT credit taken and utilised and the person from whom the inputs or capital goods have been purchased is recorded. It is to be noted even here, there is no mention of duty payable. The responsibility of the receiver of the inputs/capital goods is to ensure that duty has been paid and the same has been received by him, accounted for by him and utilized by him properly. I do not think that law requires the receiver of the inputs/capital goods to undertake this activity and therefore, even though there is no specific discussion on this aspect in the decision of the Honble High Court of Madras, yet, I feel that the decision would be applicable to the facts of the case before me.
7. Further, the Boards Circular No. 940/1/2011-CX dated 14.1.2011 was also brought to my notice. In this Circular, it has been stated that where an assessee pays Excise duty on exempted goods, the amount recovered as Excise duty has to be deposited with the Central Government and CENVAT credit also needs to be recovered in terms of Rule 14 of the CENVAT Credit Rules, 2004. Rule 14 of the CENVAT Credit Rules, no doubt, provides for recovery of credit taken. The Board assumes that if an assessee takes credit of duty which was not required to be paid but paid, availment of credit would attract the provisions of Rule 14 of the CENVAT Credit Rules. The conclusion is that the credit which was taken wrongly would arise when an assessee is required to determine whether the inputs/capital goods received by him are liable to duty or not and whether duty is payable or not. There is no rule which puts an obligation on the receiver of goods. When we take note of the fact that the assessee may receive inputs/capital goods/services classifiable under almost all the headings, it is difficult to imagine that legislature would require the assessee to determine whether duty is payable for all these items or not and then take credit. Even a jurisdictional Central Excise officer may not have all the items listed in the Schedule for assessment. In fact, assessment has been taken away even from the Central Excise officer. That being the case, the Boards Circular which has been issued without taking into consideration and considering the implications of the provisions and implications of the instructions on the assessees cannot be applied blindly to arrive at a conclusion against the assessee.
8. In view of the above discussions, I find that the impugned orders cannot be sustained. Accordingly, the impugned orders are set aside and the appeals are allowed. The stay application No. 25728/2013 in Appeal No. 25540/2013 also stands disposed of.
(Pronounced in open court on ) (B.S.V. MURTHY) TECHNICAL MEMBER /vc/