Custom, Excise & Service Tax Tribunal
The Amaravathi Cooperative Sugar Mills ... vs Coimbatore on 3 October, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
Excise Appeal No.40801 of 2015
(Arising out of Order in Appeal No. CMB-CEX-000-APP-038-15 dated 6.2.2015 passed
by the Commissioner of Central Excise (Appeals), Coimbatore)
M/s. The Amaravathi Co-op Sugar Mills Ltd. Appellant
Krishnapuram
Madathukulam Taluk
Tiruppur - 642 111.
Vs.
Commissioner of GST & Central Excise Respondent
6/7 A.T.D. Street, Race Course Coimbatore - 641 018.
APPEARANCE:
Shri K. Mani, Consultant for the Appellant Shri N. Satyanarayanan, Authorized Representative for the Respondent CORAM Hon'ble Shri M. Ajit Kumar, Member (Technical) Final Order No. 41261/2024 Date of Hearing : 23.09.2024 Date of Decision: 03.10.2024 The appellant M/s. Amaravathi Co-operative Sugar Mills Ltd. are manufacturers of Sugar etc. They had procured certain capital goods and availed CENVAT Credit. On verification of their Balance Sheet for the period 2009 - 10 to 2011 - 12 by the department it was noticed that they had made a provision under the head "Inventory Procedure and Control" for non-moving items as well as obsolete goods without paying an amount equivalent to the CENVAT credit taken in respect of the capital goods, in contravention of Rule 3(5B) of the CENVAT Credit Rules 2004. After issuing SCN dated 04/12/2013 and following the due procedure the Original Authority ordered the recovery of CENVAT 2 E/40801/2015 Credit of Rs 2,83,219/- along with interest and an equal penalty imposed. On appeal before the Commissioner Appeals the recovery of CENVAT Credit and interest was confirmed and the penalty set aside. Aggrieved by the order, the appellant is before this forum seeking relief from the demand of duty and interest.
2. Shri K. Mani, Ld. Consultant appeared for the appellant and Shri N. Satyanarayanan, learned Authorized Representative appeared for the Respondent.
2.1 Shri K Mani, learned Consultant has stated that the goods have not been written of and were only categorised as 'non-moving items' and hence credit could not be denied. Further the same legal issue was raised by CERA in 2008 and was contested and clarifications sought from the Range, hence the issue was known to the department and only the normal period can be invoked, hence the SCN dt 04/10/2013 was time barred. Further the confirmation of demand made is without jurisdiction and authority of law as there was no machinery provision during the above said period. He stated that the power to recover the amounts under Rule 3(5), (5A) and (5B) by invoking Rule 14, was granted only by amendment made vide Notification 3/2013-CE(NT) dated 01.03.2013, hence no recovery under Rule 3(5B) of the CENVAT Credit Rules 2004 can be made for the disputed period which pertains to the FY 2010 - 11 and 2011 - 12. He relied on the decision of CESTAT, New Delhi in Final Order No.51733/2021 dated 15.07.2021 in the case of M/s. Hindustan Zinc Ltd. Vs. Commissioner of Central Goods and Service Tax Commissionerate. He hence prayed that the order required to be set aside.
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E/40801/2015 2.2 The learned Authorised Representative Shri N. Satyanarayanan appeared on behalf of the respondent and reiterated the points given in the impugned order.
3. I have carefully gone through the appeals and have heard the rival parties. I find that the impugned order is contested on three grounds;
A) The legal issue was raised by CERA in 2008 and hence was known to the department and only the normal period can be invoked, hence the SCN dt 04/10/2013 was time barred.
B) The goods have not been written of and were only categorised as for non-moving items and hence credit could not be denied. C) There was no machinery provision during the above said period to confirm.
4. I find that the learned Commissioner Appeals has examined the facts and circumstances of the case to ascertain whether the order of the Original Authority was fair or not and felt that the mandatory penalty imposed be waived. Thus, he was convinced that it was not a case of misdeclaration with intent to evade payment of duty. In the circumstances it is seen that since the SCN was dated 04/12/2013 the demand for the normal period was partly time-barred. 4.1 Further as per Rule 3(5B) of the CENVAT Credit Rules 2004, as amended with effect from 01/03/2011, input or capital goods before being put to use, on which CENVAT credit has been taken is written off fully or partially or where any provision to write off fully or partially has been made in the books of account then the manufacturer or service provider, as the case may be, shall pay an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods. 4
E/40801/2015 Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of [output] services, the manufacturer or output service provider, as the case may be, shall be entitled to take the credit of the amount equivalent to the CENVAT credit paid earlier subject to the other provisions of these Rules. Hence unless the goods have been shown to be fully or partially written of, no action to reverse credit occurs under Rule 3(5B) ibid. Since revenue has not proved the same, the demand and interest confirmed cannot be sustained.
4.2 Further, I find that the appellant has correctly stated that no recovery under Rule 3(5B) can be made for the disputed period which is prior to March 2012. The power to recover the amounts under Rule 3(5), (5A), and (5B) by invoking Rule 14, was provided as per amendment made vide Notification 3/2013-CE(NT) dated 01/03/2013 by adding the following explanation to Rule 3.
"Explanation. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken."
Hence there was no provision prior to 01/03/2013 for recovery of CENVAT credit and interest thereon under Rule 3(5B) etc. 4.3 Since the impugned period pertains to the period prior to 31/03/2012 there was no power to recover an amount equivalent to the CENVAT credit taken in respect of the said input or capital goods provided for by law. This being so the order for recovery of CENVAT Credit along with interest during the impugned period was not correct and merits to be set aside.
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E/40801/2015
5. A Division Bench of this tribunal in Ericsson India Pvt Ltd. [2019 TIOL 1356 CESTAT DEL] held as under;
"7. Having considered the rival contentions, we find that the issue is one of interpretation. We further find that for reversal of cenvat credit on partial writing down of value of inputs, the provision was introduced only first time by amendment of Rule 3(5B) of Cenvat Credit Rules, with effect from 01.03.2011. Further, there was no provision prior to 01 March 2013 for recovery of cenvat credit and interest thereon under Rule 3(5B) etc. which was made applicable with effect from 01.3.2013 only, by virtue of Notification No. 3 of 2013- CE(NT) dated 01.03.2013. The notification provides that if the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (5), (5A) and (5B), it shall be recovered, in the manner as provided in Rule 14, for recovery of CENVAT credit wrongly taken.
8. Learned Counsel have also pressed the ground that as they were not required to reverse the cenvat credit on partial writing down the value of inputs, prior to 01.03.2011, accordingly, we hold that as there was no such legal requirement."
6. In the facts and circumstances of the issue and after considering the legal issues involved, I find that the impugned order merits to be set aside and is so ordered. The appellant is eligible for consequential relief if any as per law. The appeal is disposed of accordingly.
(Order pronounced in open court on 03.10.2024) (M. AJIT KUMAR) Member (Technical) Rex