Custom, Excise & Service Tax Tribunal
Bharat Heavy Electricals Limited vs Bangalore-Iii on 16 October, 2024
E/27087/2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1
Central Excise Appeal No. 27087 of 2013
(Arising out of Order-in-Original No.24/2012 dated 28.03.2013
passed by the Commissioner of Central Excise-III, Bangalore)
M/s. Bharat Heavy Electricals
Limited, Appellant(s)
P.B. No.2606, Mysore Road,
Bangalore - 560 026.
VERSUS
The Commissioner of Central
Excise,
Bangalore-III Commissionerate Respondent(s)
1st Floor, CR Building, Queens Road, Bangalore - 560 001.
APPEARANCE:
Mr. Syed Peeran, Advocate for the Appellant Mr. Rajiv Kumar Agrawal, Commissioner(AR) for the Respondent CORAM: HON'BLE DR. D.M. MISRA, MEMBER (JUDICIAL) HON'BLE MRS R BHAGYA DEVI, MEMBER (TECHNICAL) Final Order No. 21016 /2024 DATE OF HEARING: 16.10.2024 DATE OF DECISION: 16.10.2024 PER : DR. D.M. MISRA This is an appeal filed against Order-in-Original No.24/2012 dated 28.03.2013 passed by the Commissioner of Central Excise, Bangalore.Page 1 of 8
E/27087/2013
2. Briefly stated the facts of the case are that the appellants are engaged in the manufacture of ARCS panels, Semi conductor devices, Static Converters etc. falling under different chapters of Central Excise Tariff Act, 1985. During the course of audit of the books of accounts, it came to the knowledge of the department that though the appellant had written off the value of inputs, but failed to reverse the credit involved on the said inputs as required under Rule 3(5B) of the Cenvat Credit Rules, 2004. Consequently, a show-cause notice was issued to them on 28.09.2010 for recovery of the credit of Rs.1,14,03,656/- for the period 2006-07 to 2008-09 with interest and penalty. On adjudication, the demand was confirmed with interest and penalty. Hence, the present appeal.
3.1. At the outset, the learned advocate for the appellant submits that it is a public sector undertaking and manufacturers ARCS panels. They procure and import inputs for manufacture and avail credit of duty paid on such inputs. The Appellants ascertain market value of raw material inventories periodically as per company guidelines and provisions have been made to write off the value of inputs in their books of account for the slow moving stock in obsolete store and spare parts in terms of the company policy. He categorically submits that the appellant does not have a policy to write off completely the value of the stock of store and spare parts fully but maximum 95% if the stock is more than 8 years old. It is his contention that the provision to reverse credit on the value of inputs in the event it is written off partially, came into existence w.e.f. 01.03.2011; hence the same cannot be made applicable retrospectively for the period in question. In support, they have relied on the following judgements:
Page 2 of 8E/27087/2013 ➢ M/s Ericsson India Pvt Ltd v. CCE, Jaipur - 2019 (3) TMI 776-CESTAT New Delhi ➢ Sanghavi Engineering vs. CCE, Hyderabad - 2013 (297) ELT 277 (Tri.-Bang.) ➢ Owens Corning India Ltd. vs. Commissioner Of Central Tax, Raigad, Commissioner Of Central Tax & GST, Raigad - 2023 (7) TMI 474 - CESTAT MUMBAI ➢ M/s. Flowserve India Controls (P) Ltd. vs. Commissioner Of GST & Central Excise, Coimbatore -
2022 (381) E.L.T. 106 (Tri. - Chennai) ➢ M/s. Steel Authority Of India Ltd. vs. Commissioner Of Central Excise - 2020 (3) TMI 147 - CESTAT CHENNAI ➢ M/s. Kirloskar Ferrous Industries Ltd. vs. Commr., of Central Tax And Central Excise, Belgaum - 2018 (11) TMI 348 - CESTAT BANGALORE ➢ Circular No. 645/36/2002-CX., dated 16-7-2002 3.2. Also, the learned advocate submits that explanation was inserted w.e.f. 01.03.2013 to Rule 3(5) for recovery in the event cenvat credit attributable to the value of inputs not reversed fully or partially written off value of the inputs. He submits that therefore, the demand cannot be sustained in view of the following judgments of this Tribunal:-
➢ M/s Ericsson India Pvt Ltd v. CCE, Jaipur - 2019 (3) TMI 776-CESTAT New Delhi ➢ M/s. Hewlett Packard India Sales Pvt. Ltd. vs. The Commissioner Of Service Tax, LTU, BENGALURU - 2024 (8) TMI 718 - CESTAT BANGALORE ➢ Avo Carbon India Pvt. Ltd. vs. Commissioner Of CGST & Central Excise, Chennai - 2024 (8) TMI 1205 - CESTAT CHENNAI ➢ PSL Limited vs. Commissioner of C.E. & S.T. -Rajkot - 2024 (7) TMI 376 - CESTAT AHMEDABAD ➢ M/s. GKN Driveline (India) Ltd. vs. CCE, Delhi-III - 2023 (9) TMI 1131 - CESTAT CHANDIGARH ➢ Heidelberg Cement India Ltd. vs. Commissioner Of Central Excise Bangalore - 2017 (6) TMI 264 - CESTAT BANGALORE Page 3 of 8 E/27087/2013 3.3. He further submits that the demand was confirmed in the impugned order invoking extended period of limitation which cannot be sustained as the appellant has not suppressed any facts from the Department and the partial written off of the value has been disclosed in the balance sheet.
4. Learned AR for the Revenue reiterates the findings of the learned Commissioner. He submits that the appellant has failed to establish that the inputs in question have been used in relation to the manufacture of the final products.
5. Heard both sides and perused the records.
6. Undisputed facts the case are that on the basis of the company policy, the appellant had written of value of slow moving and non-moving stock based on the market value of the inputs and to a maximum of 95% if it is more than 8 years. The learned advocate has vehemently argued that during the relevant period, they have not completely written of the value of the inputs; therefore, not required to reverse the credit availed on such inputs. Also, they have argued that there was no mechanism for recovery of credit when the value of the inputs were written off as per Rule 3(5B) of the Cenvat Credit Rules, 2004 prior to the insertion of the Explanation enabling for recovery of the same w.e.f. 01.03.2013.Page 4 of 8
E/27087/2013
7. We find that the issue is no more res integra and considered by this Tribunal in the case of Hewlett Packard India Sales Pvt. Ltd. Vs. CST, LTU, Bengaluru [2024(8) TMI 718 - CESTAT BANGALORE]. This Tribunal after referring to the judgments in the case of Ericsson India Pvt. Ltd. Vs. CCE (supra) and GKN Driveline (India) Ltd. (supra), held as follows:-
7. A plain and simple reading of the same makes it clear that in the event, the assessee pays service tax in respect of a taxable service which is not paid by either wholly or partially for any reason, he may adjust the service tax so paid by him against the service tax liability for the subsequent period. Therefore, it is clear that the assessee is allowed to adjust service tax excess paid against the service tax liability for the subsequent period. Whereas in the present case, the appellant had erroneously availed cenvat credit of Rs.2,03,69,972/- and sought to adjust against service tax paid on export of services previously which cannot be considered as an adjustment of service tax relating to service tax liability for the subsequent period. However, we find that erroneous availment of cenvat credit under Rule 3(5) of the Cenvat Credit Rules, 2004 could be recoverable only after insertion of the recovery provision to the said Rule by insertion of an Explanation through amending Notification No.3/2013- CE(NT) dated 01.03.2013 as amended only w.e.f. 01.03.2013. The said explanation reads as under:-
Cenvat Credit Rules, 2004 -- Amendment In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rule to amend the CENVAT Credit Rules, 2004, namely :-
1. (1) These rules may be called the CENVAT Credit (Amendment) Rules, 2013.
(2) They shall come into force on the date of their publication in the Official Gazette.
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2. In the CENVAT Credit Rules, 2004 (hereinafter referred to as the said rules), in rule 3, after the proviso to sub- rule (5B), the following shall be inserted, namely :-
"Explanation. - If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken."
[Notification No. 3/2013-C.E. (N.T.), dated 1-3-2013] Therefore, recovery of the said cenvat credit by the learned Commissioner is erroneous. This principle has been laid down by the Tribunal in the case of Ericsson India Pvt. Ltd., which later followed in GKN Driveline (India) Ltd. (supra), which reads as:-
12. After considering the submissions of both the parties and perusal of material on record, we find that the appellant as per the normal commercial practice in the automobile industry has made a provision for writing off the cenvat credit on inputs as per Rule 3(5B) of the Cenvat Credit Rules, 2004. During the audit, the department was of the view that the appellant is required to reverse Cenvat Credit availed on inputs which were written off as per Rule 3(5B) of the Cenvat Credit Rules.
13. Further, we find that during the relevant period, there was no recovery mechanism under Rule 3(5B) of the Cenvat Credit Rules and the explanation which was introduced vide Notification No. 3/2013 dated 01.03.2013 was from 01.03.2013 vide which it was provided that if the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rules (5), (5A), and (5B), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. This recovery mechanism introduced from 01.03.2013 cannot be made applicable from the retrospective date and it can be only prospective and this issue was considered in various decisions cited (supra) by the Tribunal wherein it was held that when there was no recovery mechanism before 01.03.2013, therefore, no recovery can be affected and accordingly the present proceedings initiated under Rule 14 of Cenvat Credit Rules read with Rule 3(5B) of the Cenvat Credit Rules is liable to be dropped. 14. It is pertinent to note that the identical issue was considered by the Division Bench of the Tribunal in the case of Ericsson India Pvt.
Ltd. cited (supra) wherein the Tribunal has held as under
:-
"7. Having considered the rival contentions, we find that the issue is one of interpretation. We further find that for Page 6 of 8 E/27087/2013 reversal of cenvat credit on partial writing down of value of inputs , the provision was introduced only first time by amendment of Rule 3(5B) of Cenvat Credit Rules, with effect from 01.03.2011. Further, there was no provision prior to 01 March 2013 for recovery of cenvat credit and interest thereon under Rule 3(5B) etc. which was made applicable with effect from 01.3.2013 only, by virtue of Notification No. 3 of 2013-CE(NT) dated 01.03.2013. The notification provides that if the manufacturer of goods or the provider of output service fails to paythe amount payable under sub-rule (5), (5A) and (5B), it shall be recovered, in the manner as provided in Rule 14, for recovery of CENVAT credit wrongly taken. 8. Learned Counsel have also pressed the ground that as they were not required to reverse the cenvat credit on partial writing down the value of inputs, prior to 01.03.2011, accordingly, we hold that as there was no such legal requirement. The learned Counsel also prays that they are entitled to refund, already reversed credit on account of partial writing down of value, prior to 01.03.2013. 9. In this view of the matter, we hold that the issue has arisen due to change of opinion on the part of the Revenue, but there is no suppression of facts on the part of the appellants. Further, we find that no amount was due to be reversed under rule 3(5B) on the date of issue of show cause notice. Accordingly, we hold that larger period for limitation cannot be invoked and no show cause notice was required to be issued. Accordingly, we hold that impugned order is not sustainable, and is set aside. Appeal is allowed with consequential relief. In this view of the matter, we set aside the demand, penalty and interest"
Though the Revenue has filed appeal against the decision before the Hon'ble High Court of Rajasthan, but no stay has been granted by the Hon'ble High Court.
8. Further, we find that the Department was aware of the adjustment of the inadmissible cenvat credit against the excess service tax paid since February 2007 as communications have been exchanged between the appellant and Department resulting to payment of interest in March, 2009; and the show- cause notice was issued on 15.06.2009 i.e. after two years; thus invocation of extended period of limitation alleging suppression of fact cannot be sustained.
8. Following the above precedent and since period of recovery pertains to 2006-07 to 2008-09, the impugned order is Page 7 of 8 E/27087/2013 set aside and the appeal is allowed with consequential relief, if any, as per law.
(Order dictated and pronounced in Open Court.) (D.M. MISRA) MEMBER (JUDICIAL) (R BHAGYA DEVI) MEMBER (TECHNICAL) Raja......
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