Custom, Excise & Service Tax Tribunal
The Commissioner Of Central Excise vs Axiom Impex International Ltd on 30 July, 2009
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No.II APPEAL No.E/842/08 (Arising out of Order-in-Appeal No.CPA/5/Th-II/08 dated 29/04/2008 passed by Commissioner of Central Excise & Customs (Appeals), Mumbai) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) ====================================================
1. Whether Press Reporters may be allowed to see :
the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy :
of the Order?
4. Whether Order is to be circulated to the Departmental : authorities?
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The Commissioner of Central Excise,
Thane Appellants
Vs.
Axiom Impex International Ltd., Respondents
Appearance:
Shri.P.K. Agrawal, SDR for Appellants
Ms.Kiran Doiphode, Advocate for Respondents
CORAM:
Mr. Ashok Jindal, Member (Judicial)
Date of Hearing : 30/07/2009
Date of decision :
O R D E R No:..
Per: Ashok Jindal
1. This appeal is filed by the Revenue against the order-in-appeal, wherein a demand of Rs.3,84,965/- along with interest and equivalent amount of penalty was dropped against the respondent.
2. The brief facts of the case are that the respondent during the period April 2004 to 26/04/2004 and April 2006 to 16/07/2006 had availed exemption from the payment of Cenvat duty on their finished products vide Notification No.7/2003 dated 01/03/2004 and 30/2004 dated 09/07/2004. During that period the respondent had not availed Cenvat credit but has availed Service Tax credit. At the time of opting out of the Cenvat credit scheme, the respondent has stricken off the Cenvat credit balance lying with them on the date of opting out. Further, the respondent had not followed the procedure in respect of the service tax credit lying in balance with them on the day of opting out of Cenvat credit scheme.
3. A show cause notice was issued invoking the provisions of Section 11A (1) of the Central Excise Act, 1944 and also the provisions of received 6 (1) of Cenvat Credit Rules 2004 alleging that the respondent is liable to reverse Service Tax credit of Rs.3,84,965/- (Service Tax & Edu. Cess) lying in balance on the date of opting out of the Cenvat Credit Scheme.
4. A demand was confirmed. Aggrieved from the same, the respondent preferred an appeal before the Commissioner (Appeals), who allowed their appeal but the revenue has come in appeal before me.
5. This demand has been arisen in contravention of the Rule 6 (1) of the Cenvat Credit Rules, 2004. Before going into the merits of the case, I have to go through the provisions of Rule 6 (1) of the Cenvat Credit Rules, which are re-produced here as under:-
Rule 6 Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. (1) The Cenvat credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2).
Provided that the Cenvat credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule.
Where a manufacturer or provider of output service avails of Cenvat credit in respect of any inputs or input services, and manufacturers such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for us in the manufacture of exempted goods or services and take Cenvat credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable.
6. The Ld. SDR submitted that the case of the respondent is covered by Rule 11 (3) (ii) of the Cenvat Credit Rules 2004, which reads as follows:-
A manufacturer or producer of a final product shall be required to pay an amount equivalent to the Cenvat credit, if any, taken by him in respect of inputs received for use in the manufacture of the said final product and is lying in stock or in process or is contained in the final product lying in stock, if the said final product has been exempted absolutely under section 5A of the Act, and after deducting the said amount from the balance of Cenvat credit, if any, lying in his credit, the balance, if any, still remaining shall lapse and shall not be allowed to be utilized for payment of duty on any other final product whether cleared for home consumption or for export, or for payment of service tax on any output service, whether provided in India or exported.
And is liable to pay duty demand.
7. On the other hand, the Ld. Counsel for the respondent submits that the provisions of Rule 11 (3) (ii) of the Cenvat Credit Rules, 2004, are not applicable in this case, as these Rules have come in force with effect from 01/03/2007 and in the present case the period pertains to prior to that. She further submits that the show cause notice is served on the respondent for the contraventions of the provisions of Rule 6 (1) of the Cenvat Credit Rules and placed reliance on HMT Vs. CCE, Panchkula, 2008 (232) ELT 217 (Tri-LB), wherein it was held that the credit taken and utilized correctly - Final product was dutiable and there is no requirement to reverse the credit on final product becoming exempt subsequently and such credit not recoverable.
8. She further submits that it the respondent has wrongly stricken off the Cenvat credit on duty amount that does not amounts to that they are not entitled for the same.
9. Heard.
10. I have perused the records and note that the show cause notice is served on the respondent for contravention of the provisions of Rule 6 (1) which are not applicable in the facts of the case. Further, reliance placed by the Ld. Advocate in HMT (supra), it is well settled law that the appellant had correctly taken credit and utilized when the product was dutiable. There is no requirement to reverse credit on final product becoming exempt subsequently and such credit cannot be recoverable.
11. In these terms, I find that there is no infirmity in the impugned order and I uphold the impugned order resulting the rejection of the appeal filed by the revenue.
(Pronounced in Court on ..) (Ashok Jindal) Member (Judicial) pj 1 5 2