Custom, Excise & Service Tax Tribunal
M/S. Okay Glass Industries vs Cce, Kanpur on 9 February, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI
Date of Hearing: 19.11.2014
Date of Decision: 9.2.2015
E/Misc.No.54334/2014, E/Stay/51896/2014 in
Appeal No. E/51606/2014-EX(DB)
[Arising out of Order-in-Appeal No.KNP/EXCUS/000/COM/020/ 2013-14 dated 12.12.2013 passed by the Commissioner of Central Excise, Kanpur]
M/s. Okay Glass Industries Appellant
Vs.
CCE, Kanpur Respondent
For approval and signature:
Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) 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?
Appearance: Rep. by Shri Kapil Vaish, CA for the appellant.
Rep. by Shri Ranjan Khanna, DR for the respondent.
Coram:
Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Final Order No.50281/2015 Per Rakesh Kumar The facts leading to filing of this appeal and stay application are, in brief, as under:-
1.1 The appellant are engaged in the manufacture of dutiable glassware (tableware and kitchenware) as well as exempted articles of glass (glass articles manufactured by mouth blown process). The appellant availed cenvat credit of excise duty paid on inputs Soda Ash and other chemicals and capital goods and service tax paid on input services viz. GTA services availed for transportation of the inputs upto the factory premises and the service of pipeline transportation of the gas received in the factory. The department was of the view that since the appellant are using common cenvat credit availed inputs and input services for the manufacture of dutiable as well as exempted goods and since they do not maintain separate accounts and inventory of the inputs and input services used for manufacture of dutiable items and the inputs and input services used for manufacture of exempted items, in accordance with the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, they would be liable to pay an amount equal to 5%/10% of the sale value of the exempted goods. It is on this basis that a show cause notice dated 29.03.2010 was issued for recovery of an amount of Rs.2,08,96,245/- for the period from 1.4.2005 to 31.08.2009 along with interest thereon under Section 11 AB and another show cause notice dated 20.10.2010 was issued for recovery of an amount of Rs.15,92,240/- for the period from 1.9.2009 to 31.03.2010 along with interest thereon under Section 11 AB. Both the show cause notices, in addition to recovery of the amount payable under Rule 6(3) of Cenvat Credit Rules, 2004 along with interest, also sought imposition of penalty on them under Rule 15 of the Cenvat Credit Rules, 2004.
1.2 W.e.f. 1.3.2008, Rule 6 (3) of the Cenvat Credit Rules, 2004 was amended so as to give an additional option to every manufacturer using common cenvat credit availed inputs/input services in manufacture of dutiable as well as exempted goods and not maintaining separate accounts and inventory, to reverse the cenvat credit attributable to the input and input services used in or in relation to the manufacture of exempted final products, subject to conditions and procedure specified in sub-rule (3A) of the Rule 6. By Finance Act, 2010, a retrospective amendment was made to Rule 6 of the Cenvat Credit Rules, 2004 w.e.f. 10.09.2004 and there was also a provision that in respect of pending disputes, the appellant instead of paying an amount equal to 5%/10% of the sale value exempted final products, could pay an amount equal to the cenvat credit attributable to the inputs and input services used in or in relation to the manufacture of exempted goods, subject to production of Chartered Accountants certificate in this regard.
1.3 The above mentioned two show cause notices were adjudicated by the Commissioner by a common order-in-original no.09/COMMR/2011 dated 27.05.2011 by which out of the cenvat credit demand of Rs.2,08,96,245/- in the show cause notice dated 29.03.2010, the demand of Rs.1,29,36,741/- was dropped as the application filed by the appellant under Section 73 of the Finance Act, 2010for the period from 1.4.2005 to 31.03.2008 was accepted by the Commissioner. But the remaining demand of Rs.79,59,504/- for the period from 1.4.2008 to 30.04.2009 was confirmed. Similarly, by this order cenvat credit demand of Rs.15,92,204/- raised vide show cause notice dated 29.10.2010 for the period 1.5.2009 to 31.03.2010 was also confirmed. The Commissioner besides confirming demands, also demanded interest on the same under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11 AB of the Central Excise Act, 1944 and besides this, he also imposed penalty of equal amount on the appellant under Rule 15 (2) of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944.
1.4 The appellant filed an appeal to the Tribunal against the above order of the Commissioner. The Tribunal vide final order no.346/2012-EX(BR) dated 27.02.2012 read with misc. order no.719/2012-EX dated 11.06.2012 in respect of ROM application, remanded the matter to the Commissioner for re-quantification of the demand observing that after retrospective amendment to Rule 6(3) of the Cenvat Credit Rules, 2004 made by Section 73 of the Finance Act, there was no scope for demanding from the assessee an amount equal to 5% /10% of the sale value of the exempted final product, if the assessee is ready to reverse the actual cenvat credit attributable to the input and inputs services used in or in relation to the manufacture of the exempted final products. The Tribunal also observed that Commissioner has not given any proper reason as to why the benefit of Section 73 of the Finance Act, 2010 is not applicable for the period from April, 2008 to March, 2010 and that the benefit of Section 73 of the Finance Act would be available for this period also. The Tribunal observed that if the calculation submitted by the appellant is not correct, the commissioner has to calculate the credit amount to be reversed explaining the method he proposes to adopt after giving an opportunity of being heard. Accordingly, the Tribunal remanded the matter to the Commissioner for re-quantification of the cenvat credit to be reversed for the period from April, 2008 to March, 2010. The Tribunal also set aside the penalty on the appellants on the ground that since the matter involved interpretation of law, the penalty on them is not called for. In this regard para-10 & 11 of the Final Order No.A-346/2012-EX(BR) dated 27.05.2012 and para 2 to 6 of the Misc. Order No719/2012-EX(BR) dated 11.06.2012 are reproduced below:-
Paras-10 & 11 of the Final Order No.A-346/2012-EX(BR) dated 27.05.2012:
10. As per the provisions of Section 73(3) of Finance Act, 2010, if the Commissioner finds that the credit reversed by the assessee is not correctly reversed, the only option available to the Commissioner is to calculate it correctly and then ask them to reverse the correct amount. It goes without saying that before adopting the above manner of calculation, he has to give reasons as to why he considers that the calculation given by the assessee is not proper and he has to disclose the method he is going to adopt so that the assessee can make submissions as to why the calculation adopted by him may or may not be justified. After the retrospective amendment made by Section 73 of Finance Act, 2010, there is no scope for demanding the assessee to pay 10%/5% of the value of the exempted product. Prima facie, we are conceived that the assessee has complied with the provisions of the amended Rule 6 of Cenvat Credit Rules, 2004. Therefore, we find it proper to grant waiver from pre-deposit of dues arising from the impugned order for admission of the appeal. After granting such waiver, we take up the appeal itself for disposal.
11. Since we are of the view that the Commissioner has not given proper reasons why benefit under Section 73 of Finance Act, 2010 is not applicable for the period April, 2008 to March, 2010, in our view, this retrospectively amended provisions are applicable for the impugned period also. If the calculations submitted by the appellant is not correct, the Commissioner has to calculate the correct amount to be reversed explaining the method he proposes to adopt and giving an opportunity for hearing the appellant. Therefore, we set aside the impugned order and remand the matter to the adjudicating authority to properly decide the quantum of input credit to be reversed by the appellants as per provisions of Rule 6 of Cenvat Credit Rules. Thus the stay petition and appeal are disposed of. Para 2 to 6 of the Misc. Order No.719/2012-EX(BR) dated 11.06.2012
2.The submission of the appellant is that after hearing the case, while pronouncing the order in the open court, it was recorded that the penalties are set aside but the same is not appearing in the final order issued subsequently. On verification of the proceedings recorded, we find that the submission is correct. We also note that there is an error in numbering of the paragraphs in the order. These mistakes need rectification.
3. In view of the above position, we make the following corrections in the said final order:
The last paragraph of the order shall be numbered as 11 instead of 10.
5. After paragraph so renumbered as 11, the following paragraph is added:
12. Since the matter involves interpretation of law, we find it proper to set aside the penalties imposed by the impugned order. The matter is remanded only for re-deciding the quantum of credit to be reversed.
6. The ROM is allowed accordingly.
15. In de novo proceedings, which resulted in the impugned order dated 22.12.2013 being passed by the Commissioner, the Commissioner in para 1 to 6 of her order, after taking note of the Tribunals directions and also the orders regarding setting aside of penalty, as mentioned above, and also observing that the Tribunals final order and miscellaneous order have been accepted by the Committee, as informed by Superintendent (Review ) vide letters dated 20.04.2012 & 24.12.2012, confirmed the demand of Rs.95,51,744/- i.e. Rs.79,59,504 for the period 1.4.2008 to August, 2009 andRs.15,92,240/- for the period September, 2009 to March, 2010 along with interest and besides this, also imposed penalty of the same amount on the appellant under Rule 15 of the Cenvat Credit Rules, 2004. Against this order of the Commissioner, this appeal has been filed along with stay application. The miscellaneous application has been filed for considering the additional evidences. The additional evidence sought to be introduced consist of some documents obtained by the appellant from the department under Right to Information Act and these documents are the letters of the concerned Range Superintendent to the jurisdictional Asstt. Commissioner as well as to the Superintendent (Adjudication) supporting the appellants contention that during the period of dispute, they had not taken cenvat credit in respect of the quantity of inputs/input service used in or in relation to the manufacture of exempted final products. Since the documents sought to be introduced an additional evidence go to the root of the matter, the misc. application for additional evidence is allowed.
6. Heard both the sides.
7. Though the matter was listed only for hearing of the stay application and misc. application, after hearing these matters, the Bench was of the view that the matter can be taken up for final disposal. Accordingly, the requirement of pre-deposit is waived and with the consent of both the sides, the matter is heard for final disposal.
8. Shri Kapil Vaish, Chartered Accountant, the ld. Counsel for the appellant, pleaded that the Tribunal in its Final Order dated 27.2.2012 read with Misc. order dated 11.06.2012 in respect of the misc. application for rectification of mistake, while remanding the matter to Commissioner clearly held that the benefit of Section 73 of the Finance Act, 2010 retrospectively amending the provisions of Rule 6 of the Cenvat Credit Rules, 2004 would be applicable for the period from April, 2008 to March, 2010 also, and had remanded the matter to the Commissioner to properly decide the quantum of credit to be reversed and besides this, the Tribunal had set aside the penalty on the ground that since the matter involves only interpretation of law, imposition of penalty is not called for, that these observations and directions of the Tribunal have been duly noted by the Commissioner in para 1 to 6 of the impugned order, that the Commissioner in para-6 of the impugned order has also mentioned that the aforesaid final order and misc. order of the Tribunal have been accepted by the Committee of Commissioners as confirmed by the Superintendent(Review) vide letter no.IV-131/R/2012/5219 dated 20.04.2012 and no.1935 dated 24.12.2012 and that de novo proceedings are being conducted in compliance of the final order of the Tribunal, that in spite of this, the commissioner has not considered the appellants plea that during the period of dispute i.e. during the period from April, 2008 to March, 2010, they had not taken the cenvat credit in respect of the inputs/input services used in or in relation to the manufacture of exempted final products in spite of the information in this regard having been furnished by the appellant, that the Commissioner has wrongly once again confirmed the demand of Rs.95,51,744/- under Rule 6(3)(i) of the Cenvat Credit Rules, 2004 calculated on the basis of 5%/10% of the value of the exempted goods without computing the quantum of cenvat credit to be reversed in respect of input/input services used in the manufacture of exempted final products, that this order of the Commissioner is, therefore, contrary to the directions of the Tribunal, that not only this, while the Tribunal in the Final Order had set aside the penalty on the ground that the matter being of interpretation of rule, imposition of penalty is not called for, the Commissioner even after observing that this order of the Tribunal has been accepted by the Committee of Commissioners, has against decided to impose penalty of same amount on the appellant, that this order of the Commissioner is a perverse order against the basic cannons of adjudication and shows not only the disrespect to the higher judicial authorities but also amounts to contempt. He, therefore, pleaded that the impugned order is a perverse order and not sustainable at all.
9. Shri Ranjan Khanna, ld. Departmental Representative defended the impugned order by reiterating the findings of the Commissioner.
10. We have considered the submissions from both the sides and perused the records.
11. The appellant by using common cenvat credit availed inputs and input services manufactured dutiable final products and exempted final product. The present dispute is only for the period from April, 2008 to March, 2010. During the period prior to 2008, as per the provisions of Rule 6 (2) of the Cenvat Credit Rules, 2004, when a manufacturer by using common cenvat credit availed inputs or input services manufactured dutiable and exempted final products, he was required either to maintain separate accounts and inventory of the inputs and input services used in or in relation to the manufacture of dutiable final products and exempted final products and take cenvat credit only in respect of the inputs and input services used in or in relation to the manufacture of exempted final products or if he did not maintain such separate accounts and inventory, he was liable to pay an amount as prescribed under sub-rule 3 of Rule 6. In terms of Rule 6(3)(b) the manufacturer was required to pay an amount equal to 5%/10% of the value of the exempted goods cleared by him. However, w.e.f. 1.4.2008, such a manufacturer was given an additional option, which was to pay an amount equal to cenvat credit involved on the inputs/or input services used in or in relation to the manufacture of exempted final products and this amount was to be determined subject to the conditions and the procedure prescribed in sub-rule (3A) of Rule 6. By Finance Act, 2010, a retrospective amendment was made to Rule 6 of Cenvat Credit Rules, 2004 and the option of reversing the actual credit by a manufacturer using common cenvat credit availed inputs/input services for manufacture of dutiable as well as exempted final products become applicable w.e.f. 10.09.2004. In this case, the departments allegation is that the appellant had not maintained separate account and inventory of the inputs and input services used in or in relation to the manufacture of dutiable and exempted final products and on this basis, demand of Rs.95,51,744/- has been confirmed on the basis of 5%/10% of the value of the exempted final products cleared during the period 1.4.2008 to March, 2010. However, the Tribunal vide Final Order dated 27.02.2012 read with misc. order dated 11.06.2012 in respect of ROM application, has held that the appellant even for the period from April, 2008 to March, 2010, would be eligible for the benefit of Section 73 of Finance Act, 2010 and accordingly, would be liable to pay only an amount equal to the actual cenvat credit involved in respect of input or input service used in or in relation to the manufacture of exempted final products and the matter had been remanded to the Commissioner only for the quantification of the amount after hearing the appellant. Besides this, the Tribunal had specifically held that since the matter involves interpretation of law, imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 is not called for and had set aside the penalty. We notice that in the de novo order, the directions of the Tribunal in the remand order mentioned above have been duly noted in para- 4,5 & 6 of the Commissioners order, wherein it is also mentioned that the final order as well as misc. order have been accepted by the Committee of Commissioners. However, what we find is that the Commissioner disregarding the appellants plea that during the period from April, 2008 to March, 2010 they had not taken the cenvat credit in respect of the input/input services used in or in relation to the manufacture of exempted final products, not only confirmed entire demand on the basis of 5%/10% value of the exempted final products disregarding the directions of the Tribunal to determine the amount payable, if any, on proportionate basis, as after retrospective amendment, there is no scope for demanding from the assessee 10%/15% of the sale price of the exempted final products, but has also decided to impose penalty of equal amount on the appellant. We are of the view that this order of the Commissioner is not only without application of mind whatsoever but is also in contumacious disregard of the decision of the Tribunal. When the Tribunal has given a clear finding in the remand order that for the period from April, 2008 to March, 2010, the appellant would be required to pay an amount equal to the cenvat credit involved in respect of the input/input services used in the manufacture of exempted final products and the Tribunal also decided that in the circumstances of the case, imposition of penalty is not called for and had set aside the penalty, the Commissioner in the de novo proceedings could not have ordered determination of quantum of demand under Rule 6(3)(i) on the basis of 5%/10% of the sale value of the exempted final products and could not have decided to impose penalty of equal amount.
12. The Commissioners reasoning for confirming the demand on the basis of Rule 6(3)(i) i..e on the basis of 5%/10% of the sale value of the exempted final products is that
(a) retrospective amendment by Section 73 of the Finance Act, 2010 is not applicable for period beyond 31.03.2008; and
(b) the benefit of amendment to Rule 6(3) by notification no.10/08-CE(NT) dated 1.3.2008 is not applicable for availing the option as per clause (ii) of Rule 6(3) of reversing the cenvat credit attributable to input/input services used in or in relation to manufacture and clearance of exempted goods as far this purpose a written option is required to be given to the jurisdictional Superintendent of Central Excise in terms of Rule 6(3A) and in this case, no such option given by the assessee is on record.
However, while giving the above findings, the Commissioner has maintained total silence on the pleas of the Appellant, as recorded in para 8 of her order, that during the period of dispute, they had been maintaining separate account for receipt and consumption of the inputs & input services meant for the manufacture of exempted final products and they had not taken cenvat credit in respect of inputs/input services used in the manufacture of exempted goods. This plea of the Appellant stands confirmed by the verification report dated 6.8.2013 of the Range Superintendent to Superintendent (Tech.), Central Excise Division, Agra and the report sent by AC, Agra to AC (Adjudication), Headquarters office, Kanpur, according to which during 2008-2009 and 2009-2010, the credit not taken in respect of inputs/input services used in or in relation to manufacture of exempted final products was more than the credit required to be reversed in terms of the formula of sub-rule (3A) of Rule 6. If this is correct, there was absolutely no need to initiate the proceedings under Rule 6(3). We also fail to understand as to why the Range Superintendents report which had been forwarded to AC (Adjudication) by AC, Agra vide his letter dated 30.08.2013 has been totally ignored by the Commissioner in her order dated 12.12.2013. Even if no option has been given for reversal of cenvat credit in terms of Rule 6(3)(ii), merely on this ground the provisions of Rule 6(3)(i) can not be forced upon the assessee when the assessees claim has been that during 2008-09 and 2009-10 period, they had not taken cenvat credit in proportion to the use of inputs/input services in relation to manufacture of exempted final products. In any case, when this issue had been decided by the Tribunal in the remand order and Tribunal had directed for determination of the amount payable under Rule 6(3) in proportion to the use of inputs/input services in or in relation to manufacture of exempted final products, the Commissioner in de novo proceedings could not go into this question again. The impugned order thus, besides being in contumacious disregard of the Tribunals order, also appears to be the outcome of a dishonest exercise of adjudication function.
13. In view of the above discussion, there is no option but to set aside this order of the Commissioner and remand the matter to the adjudicating authority once again for de novo adjudication in terms of the Tribunals final order dated 27.02.2012 read with Misc. Order No.719/2012-EX dated 11.06.2012. To repeat, in the de novo adjudication proceedings, which will be the third round of adjudication by the Commissioner, the Commissioner must requantify the cenvat credit to be reversed on proportionate basis for the period from 1.4.2008 to August, 2009 strictly as per the Tribunals order i.e under Rule 6(3) (ii) read with the formula prescribed in Rule (3A) and in this regard, the Commissioner shall consider the Appellants plea that they, during this period, have not taken the credit in proportion to the inputs/input services used in on in relation to manufacture of exempted final products and also the reports of Asstt. Commissioner of Central Excise, Agra to Asstt. Commissioner (Adjudication) on this issue. In view of the Tribunals final order dated 27.12.2012, the Commissioner cannot once again go into the question of applicability of the provisions of Rule 6(3)(ii).Since the Tribunal had set aside the penalty, in de novo proceedings, the Commissioner cannot decide to impose the penalty again.
14. The conduct of the Commissioner in passing the impugned order, which was in course of de-novo proceedings in pursuance of the Tribunals Final Order dated 27.12.2012 read with Misc. Order dated 11.06.2012 and by which the demand under Rule 6(3) (i) of an amount of Rs.95,51,744/- along with interest on it under Section 11 AB has been confirmed and penalty of equal amount has been imposed, is depreciable, as the Tribunal had given a clear finding that there is no scope to ask the assessee to pay 5%/10% of the value of exempted goods and had specifically set aside the penalty and the final order and the Misc. Order of the Tribunal, as noted by the Commissioner in para-6 of her order had been accepted by the Committee of Commissioners. The order is in contumacious disregard of the Tribunals directions, besides having been passed by totalling disregarding the Appellants plea that during the period of dispute, they had not taken the cenvat credit in proportion to the use of inputs/input services in or in relation to the manufacture of the exempted final products and the report of jurisdictional Superintendent supporting this contention of the Appellant. It is this type of irresponsible adjudication which is burdening this Tribunal with mounting pendency, besides increasing the cost of compliance with the tax laws for the assessees. Safeguarding the interests of the Revenue does not mean that a duty demand must be confirmed ignoring the facts on record, pleas made by the assessee and the judgments of the Tribunal and the courts. Such irresponsible exercise of adjudication not only represents a cost for the assessee, who has to waste his time and money in pursuing the appeals, but also a cost for the Tribunal, being run with tax payers money, which has to waste its time in deciding appeals against orders which should never have been passed. What we find disturbing is that the tendency to pass such irresponsible adjudication orders is increasing and if unchecked, it would result in collapse of the dispute resolution mechanism and no amount of increase in the number of benches can bring down the increasing pendency of appeals. We, therefore, hold that ends of justice require that some cost is imposed on the Commissioner in this matter. Honble Delhi High Court in case of Rahul Enterprises vs. Commissioner of Sales Tax, reported in 1998 INDLAW DEL-341 has held that Commissioner of Sales Tax, as quasi judicial authority, can impose adjournment cost, as while awarding costs acts as a deterrent to the frequent requests for adjournment, it also compensates the other party for inconvenience caused by adjournment. In our view this principle, though in the context of frequent requests for adjournment, will apply in a case where the commissioner defying the Tribunals directing and ignoring the provisions of law passes an order which should never have been passed and thereby forcing the assessee to file appeal before the Tribunal. Accordingly, a cost of Rs.10,000/- (Rupees ten thousand only) is imposed on the Respondent Commissioner which is to be paid by the Commissioner who has adjudicated this matter. The amount of cost is to be paid to the Registry of the Tribunal within four weeks of the date of this order. The registry is directed to send a copy of this order to the Chairman, Central Board of Excise & Customs for his information.
[Order pronounced on 9.2.2015. ] ( Archana Wadhwa ) Member (Judicial) (Rakesh Kumar ) Member (Technical) ckp 1