Custom, Excise & Service Tax Tribunal
Jsw Steel Ltd. vs Commissioner Of Central Excise And ... on 17 May, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
EXCISE APPEAL NO: 87667 OF 2013
[Arising out of Order-in-Original No: 59/MAK(59)COMMR/RGD/12-13 dated
28th March 2013 passed by the Commissioner of Central Excise, Raigad.]
JSW Steel Ltd
Geetapuram, Village Dolvi, Taluk Pen, Dist: Raigad ... Appellant
versus
Commissioner of Central Excise
Raigad
Utpad Shulk Bhavan, Plot No.1, Sector - 17
Khandeshwar, Navi Mumbai - 410 206 ...Respondent
APPEARANCE:
Shri Abhishek Deodhar, Advocate for the appellant Shri Amrendra Kumar Jha, Deputy Commissioner (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: 85523/2024 DATE OF HEARING: 04/12/2023 DATE OF DECISION: 17/05/2024 PER: C J MATHEW The limited issue in this appeal of M/s JSW Steel Ltd against E/87667/2013 2 order1 of Commissioner of Central Excise, Customs and Service Tax, Raigad, directing recovery of ₹ 1,30,37,285/-, allegedly not reversed on their own as required in terms of rule 6(3) of CENVAT Credit Rules, 2004, under rule 14 of CENVAT Credit Rules, 2004, along with interest thereon under section 11AA of Central Excise Act, 1944, and imposing penalty of like amount under rule 15 of CENVAT Credit Rules, 2004 is the chargeability of the reversal at notified rate on the total value of exempted goods cleared between February 2007 and March 2011 under rule 6(3) of CENVAT Credit Rules, 2004.
2. The appellant is a manufacturer of steel products and captively consumes 'oxygen', 'nitrogen' and 'hydrogen' of which 'medical grade oxygen' was cleared from the factory without payment of duty during the disputed period. The appellant reversed ₹ 33,22,896/-, along with interest of ₹ 14,06,353/-, in February 2011 on completion of audit by central excise authorities. Nonetheless, show cause notice dated 5th March 2012 proposing recovery and detriment, as confirmed in the impugned order, came to be issued.
3. Learned Counsel for the appellant submits that compliance with the requirement of reversal before issue of show cause notice suffices for precluding resort to rule 14 of CENVAT Credit Rules, 2004 as a consequence. Reliance was placed on the decisions of the Tribunal in 1 [order-in-original no. 59/MAK(59)COMMR/RGD/12-13 dated 28th March 2013] E/87667/2013 3 Mercedes Benz India (P) Ltd v. Commissioner of Central Excise, Pune-
I [2015-TIOL-1550-CESTAT-MUM], in Cranes & Structural Engineers v. Commissioner of Central Excise, Bangalore-I [2017 (347) ELT 112 (Tri.-Bang.)], in Hamdard (Wakf) Laboratories v.
Commissioner of Customs, Central Excise & Service Tax, Ghaziabad [(2023) 4 Centax 62 (Tri.-All)] and in Star Agriwarehousing & Collateral Management Ltd v. Commissioner of Central Excise & Service Tax, Jaipur [2021 (44) GSTL 271 (Tri. - Del.)].
4. According to Learned Authorized Representative, the appellant had not reversed the credit proportionately attributable to clearance of 27923531 kgs of 'medical grade' oxygen valued at ₹ 17.26 crores. It is also contended that the appellant had not maintained separate records as prescribed in rule 6 of CENVAT Credit Rules, 2004 and, thereby, became liable to pay 10% on the value of exempted products for deemed neutralization. It is further submitted that the appellant could not take advantage of the benefit arising from amendment of rule 6 of CENVAT Credit Rules, 2004 by Finance Act, 2010 as the request has been made only on 21st February 2011 which was beyond the period available for exercise of option. In re Mercedes Benz India (P) Ltd pertaining to disputed credit to be reversed between April 2011 to February 2012, and intimated reversal in March 2012, the Tribunal had held that E/87667/2013 4 '5.1 We have observed that in Rule 6(3) prevalent at the relevant time, two options have been provided:-
(i) Payment of 5% on value of exempted services.
(ii) Payment of an amount equal to the Cenvat Credit amount attributed to input services used in or in relation to manufacture of exempted goods or provision of exempted services as provided under sub rule (3A) (b).
It is observed that the appellant has availed the option provided under sub rule (3)(ii) of Rule 6 and paid an amount as per sub rule (3A) alongwith interest and intimated the same to the jurisdictional superintendent in writing vide letter dated 14/3/2012. From the perusal of the said letter, we observed that the appellant categorically stated in the said letter that payment of Cenvat Credit which they have made alongwith interest is in accordance with Rule 6 (3A) of Cenvat Credit Rules. With this act of the appellant, it is clear that the appellant opted for the option as provided under Rule 6(3)(ii) of the Cenvat Credit Rules, 2012, in accordance to which, the appellant are supposed to an amount equivalent to Cenvat Credit on input services attributed to the exempted service in terms of Rule 6(3A). In the present case, the appellant has availed Cenvat Credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to Cenvat Credit which is attributed to the input service used for exempted service i.e. sale of car. In our view, three options have been provided under rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly E/87667/2013 5 availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. As regard the compliance of the procedure and conditions as laid down for availing option as provided under sub rule (3) (ii), we find that foremost condition is that the appellant is required to pay an amount as per the formula provided under sub rule (3A) on monthly basis. However, we find that as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under Rule (3A) of Rule 6, therefore to fulfil the condition, assessee should pay the said amount, which has been complied by the appellant.
5.2 As regard the delay in payment, if any, the appellant have discharged the interest liability on such delay. Regarding the compliance as provided under Clause (a) of Sub Rule (3A) of Rule 6 the appellant while exercising this option is required to intimate in writing to the Jurisdictional Superintendent, Central Excise, the following particulars namely:
(i) Name, address and registration No. of the manufacturer of goods or provider of output service;
(ii) Date from which the option under this clause is exeertised or proposed to be exercised;
(iii) Description of dutiable goods or taxable services;
(iv) Description of exempted goods or exempted services;
(v) Cenvat credit of inputs and input services lying in balance as on the date of exercising the option under this condition.
E/87667/2013 6 As per the submission of the appellant and perusal of their letter alongwith enclosed details, it is found that more or less all these particulars were intimated to the Jurisdictional Superintendent. The appellant has been filing their returns regularly on monthly basis to the department. On perusal of the copies of the such return submitted alongwith appeal papers, it is observed that the particulars, as required under clause (a) of sub rule (3A) of Rule 6 has been produced to the range superintendent. Therefore all the particulars which are required to be intimated to the Jurisdictional superintendent while exercising option stand produced. Though these particulars have not been submitted specifically under a particular letter, but since these particulars otherwise by way of return and some of the information under their letters has admittedly been submitted, we are of the view, as regard this compliance of Rule 6(3A), it stood made.
5.3 A s 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 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 E/87667/2013 7 the Ld. Sr. Counsel is that "option of right of choosing, something that maybe 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 which option to be exercised and not the Revenue to decide the same.
5.4 We find that the appellant admittedly paid an amount of Rs.4,06,785/- plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of Rs.24,71,93,529/- of the total value of the vehicle amounting to Rs.494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub- rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee.' Likewise, in re Cranes & Structural Engineers, it was held that E/87667/2013 8 '4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing the exercise of his option. The argument of the Department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Sub-rule (3A) of Rule 6 is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not acceptable, because the Rule does not lay down any such restriction and this has been held in the judgments cited supra. It has been held in the judgment cited supra that the condition in Rule 6(3A) to intimate the Department is only a procedural one and that such procedural lapse is condonable and denial of substantive right on such procedural failure is unjustified. Therefore, keeping in view the facts and evidence on record, the demand raised by the Revenue is not legal and proper. Moreover, the demand raised by the Revenue is also hit by limitation as the appellant reversed the pro rata credit with interest on 31-7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these E/87667/2013 9 facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any.'
5. Respectfully following the above decisions, we find that there is no merit in the impugned order which is set aside to allow the appeal of assessee.
(Order pronounced in the open court on 17/05/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as