Custom, Excise & Service Tax Tribunal
Godawari Power & Ispat Limited vs Raipur on 16 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. IV
Excise APPEAL NO. 50178 OF 2019
(Arising out of Order in Appeal No. BHO-EXCUS-002-APP-322-18-19 dated
29.08.2018 passed by Commissioner (Appeals) Central Excise & Central Tax,
Raipur)
M/s. Godawari Power & Ispat Limited ...Appellant
Plot No. 428/2, Phase-I, Industrial Area,
Siltara Raipur (CG) 493111
Versus
Commissioner of Central Excise
&Service Tax, Raipur ....Respondent
C.R. Building, Dhamtari Road, Tikrapara Raipur, Chattisgarh-492001 APPEARANCE:
Shri Krishnamohan Menon, Ms. Parul Sachdeva, & Ms. Yamini Sharma, Advocates for the appellant Mr. Rakesh Aggarwal, Authorized Representative for the Respondent Coram:
HON'BLE DR.RACHNA GUPTA, MEMBER (JUDICIAL) HON'BLE MRS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) DATE OF HEARING: 08.12.2023 DATE OF DECISION: 16/04/2024 FINAL ORDER NO. 55571/2024 MRS. HEMAMBIKA R. PRIYA M/s Godawari Power & Ispat Limited (here-in-after referred to as the "Appellant"), is filing the instant appeal against Order-in-
Appeal No. BHO- EXCUS-002-APP-322-18-19 dated 29.08.2018 (hereinafter referred to as "OIA dated 29.08.2018") passed by the ld. Commissioner (Appeals) while deciding Appeal filed against Order in Original No. 60/ADC/ CEX/RPR/2018 dated 29.03.2018 passed by Ld. Additional Commissioner while adjudicating SCN F.
2 E/ 50178/2019 No. V (Ch.72) 15-196/Commr/RPR/2015/Adj/6908 dated 22.11.2016 (hereinafter referred to as "SCN dated 22.11.2016").
2. The brief facts of the case are that the Appellant is public company listed on BSE and engaged in the business of manufacture of iron & steel products & generation of power at its integrated manufacturing facility registered under erstwhile central excise laws vide registration number AAACI7189KXM001. The Appellant had a separate division as a separate manufacturing facility namely R.R. Ispat registered separately under erstwhile central excise laws vide registration number AAABCR6219CXM001. 2.1. Similarly, the Appellant had another unit, which was taken over from M/s Hira Industries Limited having its registered factory at Pandripani, Geedam Road, Jagdalpur, Distt.: Bastar (C.G.) and was registered separately under the erstwhile Central Excise law holding Central Excise Registration No. AABCH2868PST002 also rendering services under, inter-alia, Business Auxiliary Services. 2.2. All the above units availed Cenvat credit of excise duty paid on inputs & capital goods and service tax paid on input services and filed their statutory returns separately.
2.3. The other manufacturing units of Appellant i.e. RR Ispat & Hira Industries Limited were a result of merger of said companies with Appellant. The aforesaid companies have wind mills of capacity 2.7 MW & 0.6 MW respectively in Tamil Nadu. On merger, the revenue from aforesaid wind mills also stood reflected in annual balance sheet of the Appellant.
2.4. The Appellant avails cenvat credit of excise duty paid on inputs & capital goods and service tax paid on input services. One of the 3 E/ 50178/2019 major factors on which production of Appellant is dependent is power. Thus, majority of power generated by Appellant at its captive power plant located in GPIL Siltara is used within the integrated steel plant i.e. the disputed registered premises, for manufacture of dutiable iron & steel goods. Since power cannot be stored due to its very nature, any excess production of power is wheeled out by the Appellant to the grid as sale of power. 2.5. In April 13, Appellant's records were audited and objection report DAR - 342/C.Ex/2012-13 dated 08.04.2013 was issued verifying the amount of reversal for the period 2010 11. The report at Para 7 states that no discrepancies found in amount arrived in reversal under Rule 6(3) on account of sale of electricity. 2.6. Similarly, for the period April, 2011 to March, 2013 Assistant Director (Cost), Central Excise conducted Special Audit and determined reversal under Rule 6(3). A short reversal of credit amounting to Rs. 3,05,005/- was noticed which was made good by the Appellant by making relevant reversal. Intimation in this regard was filed vide letter No. 2591 dated 06.11.2014. 2.7. Based on the manner of computation informed by the revenue in Cost Audit by Assistant Director, Cost, Appellant has similarly calculated and determined the amount to be reversed as per Rule 6(3) for the financial year 2013-14 and 2014-15. Thereafter, the Central Excise department conducted audit of the Appellant's records for the period 2013-14 & 2014-15. During the said audit the above calculations have been verified and no discrepancies have been found.
4 E/ 50178/2019 2.8. Appellant has been regularly reflecting reversal of credit on account of sale of power in its statutory annual returns i.e. ER-4. 2.9. Appellant had also filed its option for reversal of credit on account of sale of electricity in terms of Rule 6(3A). As seen no objections regarding such reversals have been made by the revenue in the past. Even on filing of the option under Rule 6(3A) intimating the formula to be adopted for reversal no objection was raised.
2.10 On scrutiny of balance sheet, the revenue noticed that Appellant has sold electricity to electricity board and has engaged in trading of goods like manganese ore, coal & imported scrap which are raw material for the Appellant at the disputed registered location and also at the other division i.e. RR Ispat. Based on the above, revenue issued instant demand notice in two parts i.e. demand of credit pertaining to sale of electricity and demand of credit pertaining to trading of goods.
2.11 Demand of credit pertaining to sale of electricity, it was the case of the revenue regarding sale of electricity that Appellant has not followed the procedure prescribed in Rule 6(3A) of the Credit Rules while making the reversal. It is admitted fact in the SCN dated 22.11.2016 that reversal is required only on common input services used in generation of electricity and manufacture of dutiable goods by the Appellant.
2.12. The SCN dated 22.11.2016 has computed the reversal of credit based on formula prescribed under Rule 6(3A) but has applied the same by consideringentire turnover of the company including all divisions which have separate registrations and has 5 E/ 50178/2019 similarly considered entire credit of input services availed by the Appellant and has not restricted the reversal only on common input services.
2.13 Demand of credit pertaining to trading of goods, SCN dated 22.11.2016 raises a separate demand alleging trading of goods like coal, manganese ore and imported scrap by the Appellant during the disputed period. It is an admitted fact in the demand notice that turnover of sale of goods has been taken from ER - 4 returns and such goods have been identified to be coal, manganese ore, imported scrap in the SCN dated 22.11.2016. It is alleged that since the activity of purchase & sale of said goods qualifies to be exempt service, Appellant is required to pay 6% of the value of such exempted service.
3. Learned Counsel for the appellant submits that computation adopted by the revenue is incorrect and Rule 6(3A) has been incorrectly applied in the instant case as regards computation is concerned. That entire basis of instant demand is incorrect application of Rule 6(3A) and hence impugned order is liable to be set asidedemand of credit on this account is liable to be dropped. 3.1 He further submits that Rule 6 has to be applied on the registered factory/premises. That while applying Rule 6, turnover, exempted clearance and credits pertaining to such registered unit is only liable to be considered while applying the formula prescribed under Rule 6(3A). This is for the reason that every registered person is a separate manufacturer in terms of Central Excise laws.
6 E/ 50178/2019 3.2 He further submits that in the instant case demand has been confirmed by considering consolidated turnover of electricity from the balance sheet of the Appellant. Such turnover includes turnover of other divisions of the Appellant located at different locations & registered separately under Central Excise laws as evidenced above. This is for the reason that balance sheet of the Appellant is not made unit wise but for the entire company as a whole as per the Statutory guidelines under the Companies Act. 3.3 He further submits that even the turnover as mentioned in ER-4 return is concerned, it includes value of electricity for Appellant unit along with sale value of items on which no reversal under Rule 6 is required as the same are not manufactured goods like iron ore fines and carbon credits. The revenue authorities failed to examine the data of ER-4 returns of the Appellant despite that the entire case has been made out based on the verification of ER- 4 returns.
3.4 However, while considering the value of credit in computation the value of credit has been taken to be entire credit availed by the Appellant including credits pertaining exclusively to dutiable activities. The Commissioner (Appeals) further goes on to hold that adoption of entire value of credit availed is correct despite admission in the demand notice itself that demand has to be confined to common services.
3.5 He further submits that the main business of Appellant is of manufacturing dutiable iron and steel goods which as evident from the returns enclosed by the Appellant. Majority of the credit availed by appellant is on inputs and input services which are exclusively in 7 E/ 50178/2019 relation to dutiable activity. The proposed computation of the lower authorities directs reversal of such credit which is exclusive for dutiable activity. The aforesaid manner of application of Rule 6(3A) is beyond the parent provision i.e. Rule 6(1) which applies only on such credit which is common to dutiable and exempted activity. That such an application is also against Rule 3(1) of the Credit Rules which allows credit on input/ input services used exclusively for taxable activities.
3.6 He further submits that apart from the aforesaid verification, the jurisdictional superintendent failed to verify the periodical returns of the appellant which clearly demonstrated as follows:-
(i) that credit amount taken in computation represents entire credit availed by the appellant unit whereas the same has to be restricted to only common input services as computed by the appellant above and also agreed by the revenue authorities during various audits;
(ii) that revenue from sale of electricity for the year has been mentioned in ER- 4 which is a relied upon document still the jurisdictional superintendent only verified the balance sheet,
(iii). that there are no independent balance sheets of the other units of the appellant company accordingly the revenue from operations for disputed period for different units is reflected only in trial balances which were open for verification of the jurisdictional superintendent based on averments of the appellant. The appellant enclosed copies of extracts of Balance Sheets of other units and appellant unit, which represent sale of electricity by each unit.
8 E/ 50178/2019 3.7 He further submits that the data which was ought to be verified by the jurisdictional superintendent and which was available in periodical statutory returns filed by the appellant was not verified and the lower authorities proceeded to decide the matter based on such inefficient verification of data by the jurisdictional superintendent.
3.8 He further submits that the workings of reversal of Rule 6 are already in any case verified and approved by the revenue authorities during various audits as per documents submitted above. That it is clear from the above that computation adopted in the said proceedings is erroneous and represents inflated amounts of reversals demanded from the appellant by inclusion of sale of electricity and credit amounts of other registered units. 3.9 Learned Counsel further submits that in view of the above, no demand survives on account of sale of electricity outside by Appellant unit as by applying appropriate formula under Rule 6(3A), the amount of reversal required is Rs. 41,15,436/- which is less than the amount already reversed by the Appellant i.e. Rs. 67,28,438/-. This part of the OIA dated 29.08.2018 is liable to be set aside on this ground itself.
3.10 He further submits that it is an admitted position in the entire proceedings that demand is to be confined only to the extent of use of common input services in generation of electricity sold outside the disputed registered premises. There can be no demand on credit pertaining to services relatable exclusively to dutiable activity. Rule 6(1) to the CENVAT Credit Rules shall apply only on credits which have nexus to exempted activity.
9 E/ 50178/2019 3.11 He further submits that during the period Appellant has already reversed CENVAT credit on common input services based on directions of the revenue during various annual audits and Cost Audit by Shri Khatwani, Assistant Director, Cost. The said reversals also stand verified by the revenue during audits and agreed to be in compliance with Rule 6(3A).
3.12 This part of the OIA dated 29.08.2018 confirms demand of CENVAT credit amounting to Rs. 95,58,241/- as 6% or 10% of the sale value with a finding that appellant has been engaged in trading of goods other than its inputs. The aforesaid finding is directly contrary to the admitted facts based on which demand notice was issued and adjudication was done.
3.13 The learned Adjudicating Authority has held in the original order that clearance of inputs as such on account of sale of inputs like coal, manganese ore & imported steel scrap (admitted inputs in statutory returns) during the disputed period is nothing but trading of goods in common parlance and therefore attracts reversal of credit on input services in terms of Rule 6. That while holding so the adjudicating authority has concluded that subject matter of clearances were nothing but inputs of the Appellant. The adjudication order did not hold that Appellant was clearing goods other than its inputs while confirming the charge of trading. 3.14 He further submits that Rule 6 of the CENVAT Credit Rules is a provision regulating availment and utilization of the CENVAT credit at the end of the manufacturer dealing in exempted goods/ services as well as dutiable goods/services. Rule 6 of the Credit Rules requires the concerned manufacturer to pay an amount equal 10 E/ 50178/2019 to cenvat credit availed on inputs or input services common for manufacture of dutiable goods & exempted services. It disallows the entire CENVAT credit on the inputs or input services used exclusively in exempted goods or services at the initial stage of booking of the credit itself.
3.15 According to Rule 6(1) of the CENVAT Credit Rules the manufacturer of the exempted goods or the provider of an exempted service shall not be allowed to avail the cenvat credit of inputs/ input services used exclusively in or in relation to the provision of exempted services. As per Rule 6(2) of the CENVAT Credit Rules every manufacturer or service provider dealing in both dutiable goods or taxable services as well as exempted goods or services shall maintain separate books of accounts for the common inputs/input services and shall take the credit of only those inputs/inputs services which has been used exclusively in manufacturing of dutiable goods or provision of taxable services. Further, if no separate books of accounts is being maintained then the manufacturer or the service provider has following options:-
a. Pay 6%/7% of the value of the exempted services under Rule 6(3)(i) of the Credit Rules or b. Pay/reverse the cenvat credit on common inputs/input services under Rule 6(3)(ii) of the Credit Rules following the procedures and formula given under Rule 6(3A). 3.16 He further submits that activity of Appellant is not covered under Rule 6 of the CENVAT Credit Rules and hence Appellant is not hit by the rigours of Rule 6. Consequently, neither any reversal nor any payment is required under Rule 6 of the CENVAT Credit Rules.
11 E/ 50178/2019 3.17 That it is an admitted position in instant proceedings that disputed clearances are that of coal, manganese ore & imported scrap. It is also admitted at Paragraph 9 of the show cause notice dated 22.11.2016 that aforesaid goods have been purchased by Appellant for use in manufacture of dutiable goods. Thus, it is undisputed that all the disputed goods are inputs of the Appellant which stand established from relied upon documents and statutory periodic returns filed by the Appellant.
3.18 That Appellant has sold its inputs on which credit has been availed i.e. coal/ manganese ore/ imported scrap on reversal of such credit under Rule 3(5) of the CENVAT Credit Rules. The aforesaid activity of clearance of inputs as such cannot be regarded as trading activity and such clearances are covered under Rule 3(5) of the CENVAT Credit Rules which undisputedly stands complied with by the Appellant.
3.19 He further submits that CENVAT credit scheme is not applicable on a trader and thus if an assessee has been entitled to take credit on goods as inputs, at the time of clearance of the same for any reason the assessee (originally a manufacturer) cannot be converted into a trader and thrown out of the CENVAT scheme for such goods which are cleared on account of commercial exigencies. 3.20 He further submits that on such instance it was an admitted position that such goods qualified to be inputs/ capital goods for the Appellant. That revenue has not made out a case to deny CENVAT credit on disputed clearances as inputs/ capital goods.
Once it is admitted that goods are inputs/ capital goods on which credit is allowed the same cannot be considered to be traded 12 E/ 50178/2019 goods. This is for the reason that traded goods are not cenvatable and are out of the purview of CENVAT Credit Rules. 3.21 He further submits that Appellant is not entitled to avail CENVAT credit on goods which are subject matter of trading. The entire CENVAT scheme is available only for entitling credit to manufacturer/ service provider on inputs/ capital goods/ input services. In fact, it for the very same reason that trading activity has been deemed to be exempted service as no credit should be entitled for such trading activity. In nutshell, a person is not entitled to avail credit on goods which are subject matter of trading activity and any input services which are in relation to such trading activity.
3.22 He further submits that once Appellant had availed CENVAT credit on goods as inputs/ capital goods and the same remains undisputed, transaction in such goods cannot be regarded as trading of goods merely because purchase & sale was incidental to procurement and clearance of such inputs. The primary reason for purchase of goods was for use as inputs/ capital goods. Similarly, sale of such goods is only a consequence of clearance of such goods on reversal of CENVAT credit under Rule 3(5) of the CENVAT Credit Rules.
3.23 The transaction of Appellant of clearance of inputs/ capital goods as such stands covered under Rule 3(5) of the Credit Rules and appropriate credit stands reversed by the Appellant on removal of disputed goods. The same transaction cannot be covered separately under Rule 6 read with Rule 2(e) of the Credit Rules for reversal of credit on common input services.
13 E/ 50178/2019 3.24 He further submitted that the issue is settled in favour of the Appellant by the Tribunal in the case of CCE Vs UP Telelinks - 2015 (329) ELT 888 (Tri - Del) wherein it has been held that clearances of inputs as such will not qualify to be a trading activity. 3.25 It has been consistently held by the Courts that when Credit Rules did not separately define trading activity then also credit was not available in proportion to trading turnover as trading activity was outside the purview of Credit Rules. Such reversal was however, not under Rule 6 of the Credit Rules. Reliance is placed on the following decisions:-
(i) Mercedese Benz India Pvt. Ltd. Vs CCE-2014 (36) STR 704 (Tri-
Bom)
(ii) Delcam Software India Pvt. Ltd Vs CCE-2016 (43) STR 103 Tri -
Bom)
(iii) TFL Quinn India Private Limited-2016-TIOL-856-CESTAT-HYD 3.26 During the said period also, there was no requirement of reversal of credits of input services pertaining to clearance of inputs/ capital goods treating the same to be trading. The aforesaid decisions have been relied upon by the appellant only to put forth the point that the word trading has to be given only a contextual meaning to include cases of buying and selling of goods which do not qualify to be inputs/capital goods for the assessee.
3.27 He further submits that in the alternative, without prejudice to the aforesaid submissions and assuming that activity of removal of inputs qualifies to be trading liable to attract Rule 6 of the Credit Rules, the demand confirmed has been computed incorrectly. 3.28 He further submits that the revenue has taken purchase & sales figures of all the divisions of the Appellant company and has 14 E/ 50178/2019 not segregated the purchase & sale figures only of Appellant factory at Silatara whose returns have been scrutinized. The other divisions of the Appellant are separately registered and have separate CENVAT records and separate implications under Rule 6 as the same are registered under Central Excise laws separately. Accordingly, to the extent of inclusion of turnover of disputed goods from other divisions, the proposed computation is incorrect. 3.29 He further submits that based on the option available under Rule 6(3A), applying correct purchase & sale figures of disputed goods and credit pertaining only to common input service credits, the amount of reversal, if any on trading activity, comes out to be Rs. 39,50,057/- based on computation given below:
Period Value of Total turnover Common Reversal exempted (including value Credit (P) (Rs.) (M/N P) goods (Power of dutiable & sold) (M) exempted sales (N) (Rs.) Rs.
2010-11 39.99.72.203 10,28,57,30,305 3,92,74,579 15,27,236 2011-12 21,00,90,060 15,83,94,08,540 4,02,53,341 5,33,911 2012-13 18,31,94,088 17,38,88,08,453 6,30,19,633 6,63,923 2013-14 9,42,66,344 16,59,07,43,914 14,28,75,546 8,11,799 2014-15 4,21,51,472 21,13,02,76,979 20,71,28,941 4,13,189 Total 92,96,74,167 81,23,49,68,191 49,25,52,040 39,50,057 3.30 He further submits that even if activity of clearance of inputs/ capital goods as such by the Appellants is considered to be exempted services, reversal under Rule 6 is sufficient and question of payment of amount of 6%/7% under Rule 6 of Credit Rules does 15 E/ 50178/2019 not arise. For this reason itself, this part of OIA dated 29.08.2018 is liable to be set aside with consequential relief to the appellant. 3.31 He also submitted that where assessee has actedunder bonafide belief which was based on directions of the revenue authorities then no charge of suppression can be leveled against the assessee. In this regard, reliance is placed on the following decisions:-
CCE Vs N.R. Agrawal Industries - 2014 (300) ELT 213 (Guj) CCE Vs Raptakos Brett & Co. - 2006(194) ELT 101 (Tri - Mum) CCE Vs Orion Ferro Alloys Pvt. Ltd - 2010(259) ELT 84 (Tri - Del) CCE Vs Rajaram Maize Products - 2010 (258) ELT 539 (Tri - Del) Final Order No. A/52257-52258/2014 - EX[DB] dated 07.05.2014 Continental Foundation Joint Venture Vs CCE 2007 (216) ELT 177 (SC) 3.32 He further submitted that the aforesaid allegations regarding suppressions of information are factually incorrect and only forwards the case of Appellant on limitation. That Rule 6 applies only on account of common inputs & input services used in manufacture of dutiable & exempted goods. That since Appellant has been periodically reversing credit under Rule 6 and the same stands verified by the department every year during audits stands testimony to the fact that revenue was always aware of use of common input services in generation of electricity. As regards declaration required under Rule 6(3A), the said declaration is prescribed statutorily and Appellant has abided by contents of such statutory prescribed declaration. The said declaration does not mandate declaration of details alleged at Para 9 of the show cause 16 E/ 50178/2019 notice dated 22.11.2016 based on which revenue seeks to invoke extended period of limitation. Once the said details were not required under the statute, non-declaration of the same cannot be regarded to be suppression of information.
3.33 He further submits that the Appellant has been regularly filing ER-1, ER & ER-6 returns declarations regarding reversal of credit & removal of inputs as such are made periodically. That it is an admitted fact that entire case is based on ER-4 returns of the Appellant. When entire information wasavailable in ER-4 returns based on which proceedings have been initiated there is no question of suppression of information.It is settled law that where facts are in knowledge of revenue authorities no suppression can be alleged:-
CCE Vs Tinplate Company of India Ltd-2013 (289) ELT 414 (Jhar) CCE Vs MTR Foods Limited-2012 (282) ELT 196 (Kar) Hindustan Heavy Chemicals Vs CCE-2009 (240) ELT 14 (Cal) CCE Vs ITC Limited - 2013 (291) ELT 377 (Tri - Kol) CCE Vs Pushp Enterprises-2011 (22) STR 299 (Tri - Del) CCE Vs Kumbh KasariSahakariKarkhana Ltd-2011 (266) ELT 87 (Tri - Mum) Trinity Auto Components Limited Vs CCE 2010 (257) ELT 548 (Tri- Mum) In this regard, the Appellant submits that the penal provisions can be invoked for serious offences, where there has been concealment or suppression with the intention to evade payment of duty on the part of the assessee in availing inadmissible CENVAT Credit.
3.34 In the present case, the revenue had knowledge that Appellant is availing CENVAT credit on disputed services & 17 E/ 50178/2019 accordingly allegations of suppression do not survive. Once there is no suppression of information, Section 11AC (1) (c) does not apply. 3.35 Issue involves bona fide interpretation of law:-
It is submitted that the present issue involves interpretation of complex legal provisions. Therefore, imposition of penalty is not warranted in the present case. In this regard, reliance is placed on the following judgments:
CCE v. Sikar Ex-Serviceman Welfare Coop. Society Ltd. 2006 (4) S.T.R. 213 (Tri. Del.) Haldia Petrochemicals Ltd. v. CCE 2006 (197) E.L.T. 97 (Tri. - Del.) Siyaram Silk Mills Ltd. v. CCE 2006 (195) E.L.T. 284 (Tri. -
Mumbai) Fibre Foils Ltd. v. CCE 2005 (190) E.L.T. 352 (Tri. - Mumbai) ITEL Industries Pvt. Ltd. v. CCE 2004 (163) E.L.T. 219 (Tri. -
Bang.) 3.36 He further submits that credit was availed on bonafide belief of admissibility of such credit as established in preceding paragraphs. It is settled law where assessee has acted under bonafide belief, penalty is not imposable. Reliance is placed on following decisions:-
CCE Vs N.R. Agrawal Industries-2014 (300) ELT 213 (Guj) CCE Vs Raptakos Brett & Co. - 2006(194) ELT 101 (Tri - Mum) CCE Vs Orion Ferro Alloys Pvt. Ltd- 2010(259) ELT 84 (Tri - Del) CCE Vs Rajaram Maize Products-2010 (258) ELT 539 (Tri - Del) Final Order No. A/52257-52258/2014-EX[DB] dated 07.05.2014 Continental Foundation Joint Venture Vs CCE-2007 (216) ELT 177 (SC).
3.37 The present proceedings also seek to recover interest under Rule 14 of the Rules read with Section 11AA of the Central Excise Act, 1944 as it is alleged that the Appellant has availed improper/ 18 E/ 50178/2019 ineligible CENVAT credit of service tax (which was otherwise not available to the Appellant).
3.38 It is submitted that charging of interest under the provisions of Rule 14 of the Rules is not proper and legal since the demand of CENVAT credit itself is not sustainable. Therefore, no interest can be demanded from the Appellant.
4. Learned Authorized Representative for the Department reiterated the findings in the impugned order. He submits that the value taken for calculation are as per the Standalone Balance Sheet (B/S) of the appellant. These Standalone B/S are at page No. 393 onwards of the appeal Book. The Figures being submitted by the appellant pertain to different units (RR Ispat and Hira Industries). These figures are taken from their balance sheet. The appellant could not submit any evidence or Chartered Accountant‟s (CA's) certificate that the figures shown in Standalone B/S of the appellant are consolidated figures and include the clearance value of other units. The appellant has tried to elude to make his submission by taking balance sheet of other units. However, they failed to prove and produce consolidated balance sheet to exhibit that consolidated figures of all units should match with separate figures of each of the unit. He further submits that the clearances of inputs as such is not trading and Rule 6 is not applicable. 4.1 He further submits that the provisions vide Rule 3 (5) of the CCR related to removal of input as such is a facility to facilitate exigency, but the trading cannot be done in the guise of the such provision. The amount of trading of Rs 38.71 crore in the year 19 E/ 50178/2019 2014-15 and similar volume of trading in previous years cannot be said to have removed input as such. The profit out of trading in the year 2014-15 is above 17%. The provision to allow clearance of input as such is not to make profit and for this reason, only the CENVAT credit equivalent to the credit availed is to be reversed. The intent of the legislature for making such provisions is not to allow the trading in its guise.In the case laws relied upon by the appellant favour the revenue holding that reversal of credit on input as such is correct in absence of any evidence of trading. The amount of trading done itself, coupled with the profit margin, is sufficient evidence of trading. Having availed the common credit and with opting for reversal as per formula, appellant is liable to pay 6% of the value of traded goods.Further, the appellant has not proved and submitted that they have availed CENVAT credit on all traded goods.
Department's submission:
Burden of proof regarding admissibility and utilization of CENVAT credit on input service is upon the appellant in terms of Rule 9 (6) of the CCR.
Under Self-assessment, it is duty of the assessee to correctly determine their liability and discharge with true disclosure. No declaration for clearance of electricity and trading in ER-1 return.
No intimation was filed with Supdt about credit reversal in terms of clause (g) of Rule 6 (3) of CCR for correct determination of credit reversal as per formula.
20 E/ 50178/2019 In terms of option exercised by the appellant, it was a bonafide belief that unit is not availing credit on common input services. Their declaration was that "No input service is specifically used for exempted trading activity". They suppressed that information that there is common input service used for trading activity. Once something is declared, it is presumed that other thing are not in existence. It was a bonafide belief that unit is not availing credit on common input services, which found to be untrue when audit of records taken place.
Despite the repeated audit objection, the appellant continued to pay lesser duty by wrong calculation, is itself evident of the fact they waited for raising objeetion and if no objection is raised, they can avail the excess credit though not due to them. Such an act amount to mis declaration with an intent to evade payment of duty.None of audit refers to trading of goods, which was never disclosed by the appellant even to audit.The appellant remained successful to suppress the critical information from scrutiny and adopted modus operandi in the manner that they seems to be compliant, but fully compliant to evade payment of correct and legitimate dues to the govt. He relied on the following case laws:-
Mercantile Company vs. Commissioner of Central Excise, Calcutta 2007 (217) ELT 330 (S.C.) B.P.L. India Ltd. vs. Commissioner of Central Excise, Cochin 2002 (143) ELT 3 (S.C.)
5. Having heard both sides, the issues that arise for our consideration are as under:
21 E/ 50178/2019 (I) Whether the computation of demand of the amount of Rs.97,01,260/- on account of CENVAT Credit availed on common input services used for the exempted goods, namely electricity cleared from the manufactory of the Appellant is correct? (II) Whether the demand of the amount of Rs 83,62,788/- on account of CENVAT Credit availed on common input services used for exempted services alleged to be Trading of goods, but claimed to have cleared inputs as such is correct?
(III) Whether the aforesaid demands are correct and justified in involving the extended period of limitation?
6. We deal each of the above issues separately below:
Computation of amount of electricity cleared outside (RE:Q.I)
7. The undisputed fact is that the appellant has exercised option to pay amount in lieu of the CENVAT Credit under Rules 6(3A) of the CENVAT Credit Rules on account of use of common inputs for dutiable and exempted goods. In the said declaration, they have mentioned electricity as exempted goods. We refer to the appellant‟s declaration dated 01.10.2016, which is available in the Appeal paperbook. However, this declaration does not indicate common use of input services. The contention is that while confirming the demand, computation of the value of the electricity cleared by the appellant‟s Siltara unit also includes the value of the electricity cleared by their other units, namely R.R. Ispat Unit and Hira Industries. For this purpose, the ld. Counsel of the Appellant has submitted additional submissions. For the sake of brevity, the 22 E/ 50178/2019 data as submitted by the learned Counsel is reproduced hereinafter;
GODAWARI POWER AND ISPAT LIMITED, RAIPUR DETAILS OF POWER SOLD FOR THE PERIOD 2010-11 TO 2014-2015 Financia Value of Value of power sold Value of power sold Value of Total l Year Exempted from the Noticee's from Wind Mill power sold Goods (M) as unit at Siltara, registered in the from Wind taken by the Raipur (Rs) name of R.R. Ispat Mill department (Rs.) registered in the name of Hira Industries (Rs.) 2010-11 42,10,27,665.0 39,99,72,203.00 1,76,36,429.00 34,19,033.00 42,10,27,665. 0 00 2011-12 22,72,79,823.0 21,00,90,060.00 1,46,63,503.00 25,26,260.00 22,72,79,823. 0 00 2012-13 20,55,50,869.0 18,31,94,088.00 1,87,66,092.00 35,90.689.00 20,55,50,869. 0 00 2013-14 10,76,40,860.0 9,42,66,344.00 1,17,00,638,00 16,73,878.00 10,76,40,860.
0 00 2014-15 5,40,64,695.00 4,21,51,472.00 1,02,14,068.00 16,99,155.00 5,40,64,695.0 0 Total 1,01,55,63,912 92,96,74,167.00 7,29,80,730.00 1,29,09,015.0 1,01,55,63,91 /- 0 2/-
7.1. The ld. Counsel of the appellant has also submitted that the issue of reversal of credit on the electricity worked out for the earlier period has already been decided by the CESTAT, New Delhi vide Final Order No.50077/2016 dt. 14.01.2016 holding reversal of credit attributable to the electricity cleared outside is sufficient. We note the fact that appellant themselves had opted for reversal of amount in lieu of the CENVAT credit under Rule 6 (3A) of Cenvat Credit Rules 2004 through an option exercised by them vide the declaration dated 01.04.2016 referred to earlier. Consequently, the said decision of the CESTAT would not apply in the current issue, except the contention for computation of the value of electricity cleared outside. The ld. Counsel has submitted that the data of clearance of electricity considered by the Department is consolidated data comprising of the clearances of electricity from their three units, whereas the demand is with respect to clearances of the electricity by their Siltara unit only, to whom this Show Cause Notice was issued.
23 E/ 50178/2019 7.2 The ld. Authorised Representative has submitted that the dispute between the department and the appellant is only with respect to the computation of value of the clearances of the electricity outside the appellant‟s unit. The Appellant in this case has been paying the amount of CENVAT Credit as was arrived by them by application of the formula prescribed under Rule 6 (3A) of the CENVAT Credit Rules in terms of the option exercised by them. While submitting that the value considered by the department is correct, the ld. AR has drawn our notice to the Balance-sheet submitted by the Appellant in their Appeal Book as Annexure -14. He has emphasized that the cover page of the Balance Sheet clearly indicates the same to be of the appellant. The same is scanned and reproduced ion the following page for ease of reference.
(Continued on the next page) 24 E/ 50178/2019 them by application of the formula prescribed under Rule 6 (3A) of the CENVAT Credit Rules in terms of the optionexercised by them.
While submitting that the value considered by the department is correct, the ld. DR has drawn our notice to the Balance-sheet submitted by the Appellant in their Appeal Book as Annexure -14.
He has emphasized that the cover page of this Balance-sheet indicates as "STANDALONE ANNUAL FINANCIAL STATEMENT FY 2014-15".Similar cover pages were found for each of the financial years.
6. As the testimony of this submission, one cover page of the annual Financial Statement has been scanned and depicted as below: -
8. We take note that the appellant has never submitted data of the electricity duly certified by the Chartered Accountant despite having many opportunities, which finds mention in the findings of the adjudicating authority, as reproduced below:
"17.2 From the Range Superintendent's report, as above, it is apparent that the Notice have failed to bring any documentary evidence to prove their claim. I find that the Notice have been extended enough opportunity during the adjudication proceedings and well by the jurisdictional Range Superintendent to establish their claim that the demand in the instant SCN has been quantified taking the consolidated sale figure from the 25 E/ 50178/2019 balance sheet which includes the figures in respect of RR Ispat Division & Wind Mill Division In view of this position the Notice‟s plea on this count is not justified and hence not acceptable. I hold that the demand of Rs.97,01,260/ - quantified in terms of Rule 6(3)(ii) read with Rule 6(3A) of the Cenvat Credit Rules, 2004 and as proposed in the SCN is sustainable against the Notice."
However, this issue whether the figures taken by the Department standalone Balance-sheet pertaining to Godawari Power and Ispat Ltd, ot not requires verification at the original stage. In view of the emphatic submissions made by the ld counsel before us, we are of the opinion that this matter requires reconsideration at the original stage and needs to be remanded.
Trading of the goods Vs. Input cleared as such: (RE:
Q.II)
9. The disputed issue is that the subject goods cleared by the appellant tantamount to the trading of goods, as alleged or whether clearances of inputs were „as such‟ as claimed by appellant. If these clearances are considered "Trading", being an exempted service (negative list of the Service Tax), the appellant was required to pay amount of CENVAT credit as per their option under Rule 6(3A) of the CENVAT credit Rules. If the clearances of these goods held to be clearance of "inputs as such" then there may not be any demand, as the appellant has cleared these goods as inputs on reversal of the CENVAT credit taken on these inputs.
10. The learned Counsel of the appellant has submitted that the clearances of these goods were nothing but their inputs such as 26 E/ 50178/2019 manganese ore fines, coal and imported scrap and other various goods to their other units of the same appellant at different locations. Since they have removed inputs as such which falls within the ambit of Rule 3(5) of CENVAT Credit Rules and it is a settled position of law that Rule 3(5) clearances do not amount to trading as per following case laws relied upon by the appellant:
1) Suyash Auto Press V CCE: 2018 (363) E.L.T. 1128 (Tribunal - Mumbai)
2) CCE V Kilitech Drugs: 2018 (364) E.L.T. 992 (Tribunal -
Mumbai)
11. Learned Authorised Representative has emphatically submitted that the provisions of Rule 3(5) relating to removal of "inputs as such" is a facility to facilitate exigencies but the trading cannot be done in the guise of such provisions. He added that keeping in view the volume of trading in each financial year, e.g. Rs.38.71 Crores in the financial year 2014-15 cannot be considered to have removal of inputs „as such‟. He further added that there cannot be any doubt about such clearances as trading as the appellant himself recognised such clearances as "Trading" of goods in their annual financial statements as well as annual returns (ER-
4). He emphasized the point that undertaking trading in the guise of inputs cleared as such would be a wind fall gain to the appellant when they have used their infrastructure along with the inputs and input services on which CENVAT credit was taken for executing such trading. He explained the advantage to the appellant for effecting trading in the guise of inputs cleared as such will always be advantageous as they can avail credit on these traded goods as inputs until its clearances, which is a financial accommodation and 27 E/ 50178/2019 further need to reverse equal amount of credit only despite use of the common input services but without reversal of the CENVAT Credit on such common input services.If these clearances are considered as trading which is an exempted service, the appellant firstly not allowed to take credit on these inputs and simultaneously was required to reverse/pay amount of the CENVAT Credit on account of used of common input services.
12. Learned Authorised Representative further submitted that the appellant has earned a substantial profit out of such trading which he arrived @ 17% in the financial year 2014-15 and similarly in other financial years as well. For this reason itself, he emphasised that such clearances cannot be considered under Rule 3(5) which is not intended to allow the trading by earn of the profit in its guise. He further explained that this would be further a wind- fall gainas appellant have to consider enhanced value of such traded goods being exempted services for reversal of the credit by use of the formula prescribed under Rule 6(3A), which they succeeded to avoid. He has, therefore, submitted that undertaking "trading" under Rule 3(5) would be against the intent of the legislature for making such provisions as a facility in exigency and not to allow trading in its guise. He further added that the common use of input services for such clearances is also not disputed by the appellant.
13. Considering the above submission from both sides, we observe that the profit earned out of such clearances, alleged to be trading, and common use of the input services has not been controverted in any manner by the ld. Counsel of the appellant.
28 E/ 50178/2019 Therefore, these are triggers to decide this issue as to whether the clearances by earn of substantial profit would remain within the ambit of "inputs cleared as such" under Rule 3(5) or would it be tantamount to the"trading of the goods", besides use of common input services. To amplify the above dispute, it is relevant to carefully examine the provisions of Rule 3(5), which is reproduced below:
"(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from thefactory, or premises of the provider of output service, the manufacturer of the final products or provider ofoutput service, as the case may be, shall pay an amount equal to the credit availed in respect of suchinputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:
Provided that such payment shall not be required to be made where any inputs or capital goodsare removed outside the premises of the provider of output service for providing the output service:
Provided further that such payment shall not be required to be made where any inputs areremoved outside the factory for providing free warranty for final products:] (5A) (a) If the capital goods, on which CENVAT credit has been taken, are removed after being used,the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken onthe said capital goods reduced by the percentage points calculated by straight line method as specifiedbelow for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-
(i) for computers and computer
peripherals:for each quarter in
the first year @ 10%
(ii) for capital
for each quarter in the second year @ 8%
goods, other
for each quarter in the third year @ 5%
thn than
for each quarter in the fourth and fifth
computers and
year @ 1%
computer
peripherals
@ 2.5% for each quarter:
Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.
29 E/ 50178/2019
(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to theduty leviable on transaction value.] [(5B) If the value of any,
(i) input, or
(ii) capital goods before being put to use, 25[on which CENVAT credit has been taken is written offfully 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:
Provided that if the said input or capital goods is subsequently used in the manufacture of final products or the provision of 32[output services], the manufacturer or output service provider, as the casemay 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.] (5C).- Where on any goods manufactured or produced by an assessee, the payment of duty is orderedto be remitted under rule 21 of the Central Excise Rules, 2002, the CENVAT credit taken on the inputsused in the manufacture or production of said goods and the CENVAT credit taken on input services used in or in relation to the manufacture or production of said goods] shall be reversed.
Explanation 1 .- The amount payable under sub-rules (5), (5A), (5B) and (5C), unless specifiedotherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting theCENVAT credit or otherwise on or before the 5th day of the following month except for the month ofMarch, where such payment shall be made on or before the 31st day of the month of March. Explanation 2.- If the manufacturer of goods or the provider of output service fails to pay the amountpayable under sub-rules (5), (5A), (5B) and (5C), it shall be recovered, in the manner as provided in rule14, for recovery of CENVAT credit wrongly taken and utilised.]
14. We find that the aforesaid rule deal with the removal of input as well as capital goods as such from the factory of the manufacture of the final product. The expression "as such" in the aforesaid rule has been expanded for the capital goods in as much as the removal of the capital goods after being use have also been allowed clearances on payment of CENVAT Credit in the manner 30 E/ 50178/2019 prescribed. However, for removal of inputs, no such expansion has been created. If the intention of the legislature was to allow input as such on an enhanced value, then the legislature would have definitely prescribed so. In the light of having provisions for eventually clearance of the capital goods in different circumstances, the legislative intent for allowing clearance of inputs as such in this context likely to be referred that the clearance of the inputs without any value addition or processing. The legislative intent emerging out of the plain reading of the relevant provision of Rule 3(5) further strengthened by the Larger Bench judgement of the Tribunal in the case of MODERNOVA PLASTYLES PVT. LTD.Vs. Commissioner of C.Ex., Raigarh. [2008 (232) E.L.T. 29 (Tri. - LB)]. This case is specifically on the interpretation of the expression "as such" and accordingly, the observation of the Larger Bench is as follows:
"We have heard both sides on the issue referred to the Larger Bench, which relates to interpretation of the expression "as such" appearing in Rule 4(5)(a) of the Cenvat Credit Rules, 2004, which reads as under :-
"The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, reconditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory."
The same expression is also used in Rule 3(4)(c) of the 2004 Rules and the rule reads as under :-
"When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final products shall, pay an amount equal to the credit availed 31 E/ 50178/2019 in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7.1."
2. The expression "as such" has to be interpreted as commonly understood, which is in the "original form" and "withoutany addition, alteration or modification". It does not have any connection with the goods (capital goods) being new/unused orused. In Sarkar‟s "Words & Phrases of Excise, Customs & Service Tax", the expression "as such" has been defined as "in or by itself alone". It does not distinguish between a new/unused and a used product. In the case of BILT Industrial Packaging Co. Ltd. vs. CCE, Salem - 2007 (216) E.L.T. 217, the Tribunal has brought out how, in Rule 57S(2) as it earlier stood, the expressions "withoutbeing used" and "after being used" were mentioned, and subsequently these two clauses were merged into one by using theexpression "as such" which clearly shows that the expression is intended to cover both capital goods cleared without use andcleared after being put to use. Ever since the inception of the Modvat/Cenvat Scheme, capital goods, whether used or unused,were allowed to be removed from a factory only on payment of duty or on reversal of Cenvat credit taken. Initially, used capitalgoods could be removed after reversing proportionate credit depending upon the period of use, as per Notification 23/94-C.E.dated 20-5-1994. This system was later changed to charging duty on used capital goods, cleared on the transaction value as perNotification 6/2001-C.E. dated 1-3-2001 and w.e.f. 13-11-2007 vide Notification 39/2007-C.E., the concept of reversal ofproportionate credit has been reintroduced. If the expression "as such" is held to cover only unused or new capital goods,manufacturers who wish to remove used capital goods to job workers‟ premises for testing, repairing reconditioning etc., would not be able to avail of the facility under Rule 4(5)(a). Further, if the expression "as such" is interpreted to mean new or unusedcapital goods, then the question of testing, repairing or reconditioning them does not arise and the terms „testing‟, „repairing‟ and„reconditioning‟ would become redundant, and any interpretation which results in rendering any portion of rule or legislationredundant, should be avoided, as held by the Apex Court in Amrit Paper v. CCE, Ludhiana - 2006 (200) E.L.T. 365 (S.C.) and RajeshKumar Sharma v. UOI - 2007 (209) E.L.T. 3 (S.C.).
14.1 The ratio emerging from the aforesaid decision of the Larger Bench that "as such" is to be interpreted as commonly understood which is in the original form and without any addition, alteration or modification. The phrase „as such‟ is to be interpreted to mean what is being indicated or suggested i.e. anything per se with respect to its inherent nature. Thus for anything to be „as such‟, nothing should have changed whether it be appearance.
32 E/ 50178/2019 Composition quantity or even the value assigned to it at the initial state. Thus, any change from the original form, whether physical or monetary, as is, in the present case is earning of profit, will consequently keep such clearances out of the purview of the Rule 3 (5), whereas same is not the case for capital goods which were allowed to be cleared after use in the manner prescribed.
15. While contending the issue, ld. counsel of the appellant has relied upon two case laws as mentioned in para 10 above. The case of Suyash Auto Pres Components and Assemblies Pvt. Ltd. is distinguishable of three aspects: Mumbai Tribunal in 2018 has not given any finding on the expression „as such‟ and the decision of the Larger Bench of the Tribunal in the case of Modernova Plastyles Pvt. Ltd was not before the Mumbai Tribunal; second aspect is of the use of common input services; and third aspect is the change in original form on account of profit earned. Similarly in the case of Kilitech Drugs (India) Ltd, the Mumbai Tribunal has held as there was no evidence of use of input services, which is abundantly available in present case. In fact, this judgment of Mumbai Tribunal favors revenue in view of evidence of trading by virtue of profit earned on the clearances of inputs even to their own units. Additionally, the decision of the Larger Bench defining the expression of "as such" is abiding precedence for us and applying the ratio drawn from it in the facts of this present case, we are inclined to accept the submission of the department by holding that these clearances are beyond the expression of "inputs cleared as such"; and thus, amounts to "trading of goods". Trading, being an exempted service, was done by use of common 33 E/ 50178/2019 input services attracting the provisions of Rule 6 of CENVAT Credit Rules, and the appellant has not maintained separate accounts of common input or input services.
16. While confirming the demand as arrived at by adjudicating authority, duly upheld by the Commissioner (Appeals) vide impugned Order-in-Appeal, we are conscious of the fact that appellant has reversed the Cenvat Credit on these goods which they had traded. In view of the said factual position, we direct that the amount so reversed is liable to be appropriated against the demand. Accordingly we remand this matter to the original authority to recalculate the differential demand taking due note of the CENVAT credit which is already reversed.
Extended Period (RR : Q. No. III)
17. On the issue of limitation, the department alleged that "the Noticee has indulged in willful suppression of the fact of generation of income from selling electricity generated by using common input and input services and engaging in trading activity by selling of goods which were purchased and released by them for use in the manufacturing process and of Rule 6 of the Rules and the amount they were required to pay under Sub-Rule 6(3)(ii) and Rule 6 (3)
(i) and had not paid the required amount with an intention and to evade payment of Central Excise duty. The Noticee has deliberately never disclosed these facts in their intimation filed under Rules 6(3A) of the Rules and also deliberately paid less amount which they are correctly liable and thus are liable to be penalized. The scrutiny of their Annual Financial information statement in form ER-4 filed by them revealed the separation of 34 E/ 50178/2019 the above facts by them of deliberately evading the payment of said amount on sale be exempted goods viz electricity and providing exempted services viz trading of goods,which is recoverable from them under Rule 14 of the Rules read with Section 11A of the Act, along with interest at the appropriate rate under Rule 14 of the Rules read with Section 11 AA of the Central Excise Act. It also appears that the Noticee has also rendered themselves liable for penal action under Rule 15 (2) of the Rules read with Section 11 AC (1) © of the Central Excise Act 1944."
18. The ld. counsel of the appellant has submitted that they were subjected to periodic audits and also submitted periodic returns with full disclosure; that they were successful in earlier proceedings before the Tribunal when the Hon‟ble Tribunal vide its order dated 14.1.2016 held that "the respondent have not taken any undue benefit and they have reversed the credit attributable to the electricity cleared outside.There is no cause for initiating action for recovery of 8% or 10% of the value of such electricity"; that referred to an intimation dated 1.10.2016 filed to the Department having their declaration to opt for option as provided under Rule 6(3A) of Credit Rules and that it is an bona-fide issue of interpretation of law. The learned counsel has prayed that in view of the above, there is no malafide/suppression and the imposition of penalty and invocation of extended period of limitation liable to be set aside.
19. While reiterating the findings of the Adjudicating Authority on the aspect of extended period of limitation, ld. AR has submitted that the burden of proof regarding admissibility and utilization of 35 E/ 50178/2019 CENVAT Credit is upon the appellant in terms of Rule 9(6) of the CENVAT Credit Rules. Moreover, under the era of self-assessment, it is a duty of the assessee to correctly determine their liability and discharge with true disclosure. He referred to the option exercised by the appellant by filing a declaration under Rule 6(3A) of the CENVAT Credit Rules, 2014. This option was exercised only in case of not maintaining separate record but using common input and input services for manufacture of dutiable and exempted goods/services. Once an option exercised, it is applicable to the manufacturer.
19.1 He demonstrated the aforesaid declaration having declaration „electricity has exempted goods‟ and „trading as exempted services‟ in the column No.3(v) and 3(vi) of the said declaration. Though, they have declared that „no input services specifically used for exempted trading activity‟ but they have not declared common input services used for exempted goods and services.During the audit of the unit, the appellant was found to have used common input services for the electricity as well as trading to the goods, which is not disputed by the appellant.
19.2 The Learned Authorised Representative submitted that having filed the option under Rule 6(3A), the statutory requirement to file intimation to the jurisdictional Superintendent of Central Excise within a period of 15 days from the date of payment or adjustment as per provisions of clauses (g) of Rule 6 (3A) was not filed by the appellant. It was a mandatory intimation which reveals to the officer about the details of the CENVAT Credit availed and 36 E/ 50178/2019 reverse in the prescribed manner. The provisions of this clauses
(g) of Rule 6 (3A) is re-produced below :-
(g) the manufacturer of goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:-
(i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b),
(ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition
(c),
(iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid,
(iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and
(v) credit taken on account of excess payment, if any, determined as per condition (f);
19.3 The Learned Authorised Representative led us to the content of (paragraph 2 of the show cause notice) "Central Excise Audit of the books and accounts of the Noticee was conducted by the Audit Officers of Central Excise, Raipur. The audit team, on the basis of records, financial details of manufacturing activities, including form ER-4 for the financial year 2010-11, submitted by the Noticee, pointed out that they were engaged in the manufacture and removal of dutiable and exempted goods as well as in trading activities. The Noticee was availing Cenvat Credit on common input services including services such as air import customs agency services, clearing & forwarding agency services, customs house agency services, hiring of tangible goods services, supply of man power services, repair & maintenance services. However, it was found that they had not followed the procedure laid down under 37 E/ 50178/2019 Rule 6(3A) of the Rules for payment of amount as determinable under sub-rule 3 of the Rule 6 of the Cenvat Credit Rules, 2004 as they had availed Cenvat Credit on common services used in or in relation to manufacture of non-exempted goods and exempted goods and in or in relation to providing of output service and had opted not to maintain separate account t in respect of receipt and consumption of inputs and input services."
19.4 Furthermore, it has been submitted that neither the clearances of electricity nor the trading of the goods were ever declared by the appellant for their ER-1 and ST-3 monthly returns which is also not disputed by the ld. Counsel of the appellant. Thus, in absence of intimation to be filed under clause (g) of Rule 6 (3A) of CENVAT Credit Rules, non-disclosure of electricity and trading in their monthly returns and in view of the option to revers CENVAT Credit only on the inputs, the present litigation is a result of the Central Excise audit of the books and account of the Appellant.
20. The contention of the learned counsel of the appellant that they were subjected to the audits earlier may not immune them as they have not provided any evidence of the disclosures to the audits earlier which render them to prove that department ignored certain facts despite being bought to the notice. Audit is always a selective audit and non-pointing out of any lapse by audit depend upon the many factors like disclosure of the information to the audit, submission of the concerned record before the audit, thorough disclosure of the activity before the audit etc. Non 38 E/ 50178/2019 pointing out during audit cannot be a ground to declare it to be non-suppression.
21. As regards the contention of the learned Counsel that they have succeeded in proceeding under the order of the Tribunal dt. 14.01.2016 for reversal of the Credit attributable to the electricity cleared outside is no more applicable under consideration that the assessee himself opted to reverse the Credit under Rule 6(3A) instead of following same in the way held by the Tribunal.
22. Having opted for reversal under Rule 6(3A), it was bonafide belief of the department that the assessee ought to be reversing the CENVAT Credit for the exempted goods and exempted services in the manner prescribed under Rule 6(3A).
23. Even the relied upon judgments to favour them in the case of Savarna Stocks Pvt. Ltd. Vs. Commissioner Chennai [2021 (52) G.S.T.L.408 (Tri-Chennai)] cannot rescue them in view of the option exercised to follow Rule 6(3A) which was not the case of Chennai Tribunal. Similarly, the case of Reliance Industry Ltd. [2019 (28) GSTL 96 (Tri-Ahmd.)] is not applicable as the facts of the case is different from present case in as much as the appellant have not pleaded grounds which were subject matter in the Reliance Industries Ltd.
24. The admitted facts in the case are that the declaration under Rule 6(3A) filed by the assessee on 1.10.2016 was found to have not mentioned the common input services which was used for both exempted goods and services. A plain reading of this declaration would not indicate any revelation about use of common input services for the exempted goods and services. The appellant 39 E/ 50178/2019 cannot feign ignorance as to the necessity of furnishing such relevant details for determination of payment of amount in lieu of the CENVAT Credit as prescribed under clause (g) of Rule 6(3A) which they also failed to intimate. Non-disclosure of clearances of electricity and trading of goods in their monthly return (ER-1 and ST-3) cannot fetch ignorance as they were bound to disclose such information in their monthly statutory returns. The assessee is a public limited company and having been in this industry for a long time was well aware of the statutory requirements. Upon a deeper examination of said declaration under Rule 6(3A) dated 1.10.2016, the suppression is apparent, following non mention of the expression „input services‟ which they ought to have been disclosed which was revealed in the Audit of their records. By their self- acceptance of „Trading of goods‟ in their Annual Financial Statements, ER-4 return and the declaration under rule 6 (3A) but considering such trading as clearance of input as such in their own interest is evident of motive for profiting from the same.
25. Under the fact and circumstances, it would be apposite to note the judgement of Supreme Court in Continental Foundation Jt. Venture Vs. Commissioner of Central Excise [(2007) 10 SCC 337] that suppression mean failure to disclose full information with intent to evade payment of duty. It is this hiding of the fact and not specifying the details in various declarations led to issuance of SCN and invocation of extended period of the limitation.
26. The Hon‟ble Supreme Court in Mercantile Company Vs. Commissioner of Central Excise, Calcutta [2007 (2017) 40 E/ 50178/2019 E.L.T.330] upheld the extended period for the reason that the letter sent by appellant to department does not disclose the entire fact and actual activity under taken and thus department did not have full knowledge of activities.
27. It is settled principle in law that existence of ingredients leading to invocation of extended period of limitation is a "question of the fact" and the facts of the case in hand will determine whether the extended period of limitation could have been invoked, unlike the "question of law" where the determination can be made on the basis of the available judicial precedents.
28. We also place reliance on the following decisions wherein various courts and Tribunal has held in invocation of extended period of limitation in similar circumstances. In case of Neminath Fabrics [2010 (256) E.L.T. 369 (Guj.)], Hon'ble Gujarat High Court has held as follows:
"16. The termini from which the period of "one year" or "five years" has to be computed is the relevant date which has been defined in sub- section (3)(ii) of Section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub- section (1) of Section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal.
17. The proviso cannot be read to mean that because there is knowledge the suppression which stands established disappears. Similarly the concept of reasonable period of limitation which is sought to be read into the provision by some of the orders of the Tribunal also cannot be permitted in law when the statute itself has provided for a fixed period of limitation. It is equally well settled that it is not open to the Court while reading a provision to either rewrite the period of limitation or curtail the prescribed period of limitation.
18. The Proviso comes into play only when suppression etc. is established or stands admitted. It would differ from a case where fraud, etc. are 41 E/ 50178/2019 merely alleged and are disputed by an assessee. Hence, by no stretch of imagination the concept of knowledge can be read into the provisions because that would tantamount to rendering the defined term "relevant date" nugatory and such an interpretation is not permissible.
19. The language employed in the proviso to sub-section (1) of Section 11A, is, clear and unambiguous and makes it abundantly clear that moment there is non-levy or short levy etc. of central excise duty with intention to evade payment of duty for any of the reasons specified thereunder, the proviso would come into operation and the period of limitation would stand extended from one year to five years. This is the only requirement of the provision. Once it is found that the ingredients of the proviso are satisfied, all that has to be seen as to what is the relevant date and as to whether the show cause notice has been served within a period of five years therefrom.
20. Thus, what has been prescribed under the statute is that upon the reasons stipulated under the proviso being satisfied, the period of limitation for service of show cause notice under sub-section (1) of Section 11A, stands extended to five years from the relevant date. The period cannot by reason of any decision of a Court or even by subordinate legislation be either curtailed or enhanced. In the present case as well as in the decisions on which reliance has been placed by the learned advocate for the respondent, the Tribunal has introduced a novel concept of date of knowledge and has imported into the proviso a new period of limitation of six months from the date of knowledge. The reasoning appears to be that once knowledge has been acquired by the department there is no suppression and as such the ordinary statutory period of limitation prescribed under sub-section (1) of Section 11A would be applicable. However such reasoning appears to be fallacious inasmuch as once the suppression is admitted, merely because the department acquires knowledge of the irregularities the suppression would not be obliterated."
29. In case of Usha Rectifier [2011 (263) E.L.T. 655 (S.C.)], Hon‟ble Supreme Court observed as follows:
"12. Submission was also made regarding use of the extended period limitation contending inter alia that such extended period of limitation could not have been used by the respondent. The aforesaid contention is also found to be without any merit as the appellant has not obtained L-4 licence nor they had disclosed the fact of manufacturing of the aforesaid goods to the department. The aforesaid knowledge of manufacture came to be acquired by the department only subsequently and in view of non-disclosure of such information by the appellant and suppression of relevant facts, the extended period of limitation was rightly invoked by the department."
42 E/ 50178/2019
30. In the case of ICICI Econet Internet & Technology Fund [2021 (51) G.S.T.L. 36 (Tri. - Bang.)], Bangalore bench has observed as follows:
"46. We find that the appellants have argued that this is a matter of interpretation and all the information being in public domain, suppression of any material fact with intent to evade payment of duty cannot be alleged. The appellants have relied upon this Bench‟s decision in the case of Gateway Hotels, 2020 (37) G.S.T.L. 210 (Tri. - Bang.). We find that in that case, the fact was that the appellants have been filing the returns regularly and there was a confusion regarding the correct position of lawduring the relevant time. The facts of the case are different. It cannot be argued that suppression cannot be alleged as the information is in the public domain. Information being in the public domain is not of any consequence. The information should be in the knowledge or made available to the authorities concerned who need to take a certain decision depending on such information. It is not the case of the appellants that they have been paying applicable service tax on getting registered and have been submitting regular returns to service tax authorities. It is not the case of the appellants that the material information available in the form of various contracts/agreements and balance sheets/ledgers have been submitted to the Department suo motu by the appellants. It is only after investigation has been initiated, the necessary documents were submitted. Thus, the information available in the public domain is of no avail.We find that Learned Adjudicating Authority has rightly relied upon in the case of CCE, Calicut v. Steel Industries Kerala Ltd., 2005 (188) E.L.T. 33 (Tri. - Bang.)
31. In view of the foregoing discussion, we are of the considered view that the appellant succeeded in suppressing critical information from scrutiny. Hence the extended period is rightly invokable in the case.
32. Since it is established, that appellant had suppressed the material facts and misstated with intent to evade payment of amount of Cenvat credit, the penalty under Section 11AC shall be natural consequence as has been held by Hon‟ble Supreme Court in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)]. The Apex court held the application of Section 11AC would depend upon the existence or otherwise of the conditions 43 E/ 50178/2019 expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A.
33. The interest liability for delayed payment of amount of CENVAT credit also cannot be disputed. Appellant has not paid the amount, payable by them as per admitted position under Rule 6 (3A) on the exempted goods cleared by them by the due date and hence demand of interest on the delayed payment is justified. Hon‟ble Bombay High court has in case of P V Vikhe Patil SSK [2007 (215) ELT 23 (Bom)] held that there is no discretion not to charge the interest u/s. 11AB at all and language of Section 11AB is unambiguous. The person, who is liable to pay duty short levied/short paid/non-levied/unpaid etc., is liable to pay interest at the rate as may be determined by the Central Government from time to time.
34. In view of above discussions, we hold as follows:
(I) Computation of demand of the amount of Rs.97,01,260/- on account of CENVAT Credit availed on common input services used for electricity: The extended period is upheld while the issue is being remanded to the original authority to verify the figures, giving the opportunity to the appellant to place all necessary documentation in support of their contention that the figures are inclusive of their 2 other units.
(II) The demand of the amount of Rs 83,62,788/- on account of CENVAT Credit availed on common input services used for exempted services alleged to be Trading of goods: The demand is 44 E/ 50178/2019 upheld. However in view of the factual position wherein the appellant has reversed the proportionate Cenvat credit on clearance of the inputs, the matter is remanded to the original authority to recalculate the differential duty.
(III) Thus, invocation of extended period is upheld. 34.1 The above discussion with respect to the grounds invoking the extended period of limitation is sufficient for us to hold that while committing the said observed acts, the appellant has rendered himself liable for penalties. We therefore, do not find any infirmity in the impugned order when penalty has been imposed. However, as under Issues No. I and II, we have already directed the re-quantification of the demand confirmed on that issue and that quantum of penalty to be imposed has to be proportionate of the amount of demand confirmed. The impugned order is upheld partially with the modifications as indicated above, and the appeal is allowed partially and also by way of remand.
[Pronounced in the open Court on 16/04/2024] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) GY/ss.