Custom, Excise & Service Tax Tribunal
M/S Jai Balaji Industries Limited vs Cce &St, Raipur on 8 December, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi, Court No. 1 Date of hearing: 21.11.2016 Date of pronouncement: 08/12/2016 Excise Appeal No. 57299 of 2013 (Arising out of order-in-original No. COMMISSIONER/RPR/CEX/28/2013 dated 31.01.2013 passed by the Commissioner of Central Excise, Raipur). M/s Jai Balaji Industries Limited Appellant (Sh. K. K. Anand, Advocate for the Appellant) Vs. CCE &ST, Raipur Respondent
(Shri R. K. Manjhi, AR for the Respondent) Coram:
Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 55751/2016 Per: V. Padmanabhan:
The appeal is directed against the order dated 31.01.2013 passed by the Commissioner, Central Excise, Raipur. The dispute involves reversal of cenvat credit under Rule 6 (3) of the Cenvat Credit Rules, 2004. The appellant is engaged in the manufacture of sponge iron. The electricity required for use within the factory premises is generated using a power plant installed in their factory premises. The appellant availed cenvat credit of certain common inputs as well as input services which were used in the manufacture of dutiable final products as well as in the production of electricity, but did not maintain separate accounts for the inputs as well as input services used for this. Since no duty has been indicated against electricity in Central Excise tariff item 27 16 0000, it is to be considered as exempted goods. Accordingly, the department took the view that in terms of Rule 6(3) of the Cenvat Credit Rules, the appellant is required to reverse an amount equal to 10% (upto 06.07.2004) and 5% from 07.07.2009 of the value of exempted goods (electricity in this case). In the impugned order, demands for reversal to the extent of Rs. 1,47,81,450/- was confirmed alongwith interest as well as imposition of penalty.
2. In the present appeal, the demand for reversal of cenvat credit has been challenged. Their submission is that a part of electricity generated within the plant has been sold outside, though the main part of the electricity generated was used captively for manufacture of final products. They further submitted that they have already reversed proportionate share of the credit availed on inputs as well as input services which stand used in the generation of electricity which has been sold outside. Accordingly, theY have submitted that there is no justification for demanding 10%/ 5% of the value of electricity under Rule 6(3) of the Cenvat Credit Rules. Further, they relied upon the final order of the Tribunal in the case of M/s Salasar Sponge & Power Ltd. vs. CCE, Raipur vide order dated 10.08.2016.
3. Heard Shri K. K. Anand, Ld. Advocate for the appellant and ld. AR Shri R. K. Manjhi, for the Revenue.
4. It is not in dispute that the appellant has taken cenvat credit of various inputs as well as input services which are used in the generation of electricity which is used to run the factory for manufacture of sponge iron and other products. Part of the electricity has been sold outside. In respect of inputs as well as input services attributable to the electricity used captively, the cenvat credit is fully justified and there is no justification for reversal. However, in respect of the portion of cenvat credit attributable to the inputs/ input services used in the generation of electricity sold outside, it is to be held that such inputs/ input services have not been used towards manufacture of dutiable final products. Rule 6(3) of the Cenvat Credit Rules requires reversal of an amount to the extent of 10%/ 5% of the value of exempted products. Demands stands made and confirmed to the extent of Rs. 1,47,81,450/- by taking the above view. The submission of the appellant is that the appellant has already reversed the entire cenvat credit alongwith interest on proportionate basis i.e. in respect of common inputs used in the generation of electricity wheeled out to Electricity Board. The same also stand intimated to the department. Such claims when made before the original authority has not been accepted by him for the reason that the appellant has not followed all the conditions specified in Rule 6(3)(i)(ii) and (iii) of the Cenvat Credit Rules, 2004. These sub-rules mandate that the assessee should intimate their option to the department for proportionate reversal; carry out reversal on provisional basis and finally complete such reversal and intimate the department. Admittedly, such detailed procedure has not been complied with by the appellant. However, it is the submission of the appellant that they have already reversed the proportionate credit to the extent of Rs. 12,37,964/- alongwith to the extent of Rs.2,15,644/-. Consequently, they have argued that demanding the full amount calculated @ 10% / 5% of the value of electricity, will not be fair.
5. The Honble Supreme Court in the case of Chandrapur Magnet Works (P) Ltd. vs. CCE, Nagpur 1996 (81) ELT 3 (SC) which has been followed in many other decisions of the High Court as well as the Tribunal has held that once cenvat credit is reversed, it is to be considered ab initio not availed. In the light of this judgement of the Honble Supreme Court, the reversal of cenvat credit already made by the appellant is to be considered as not taken ab initio.
The Government has introduced the facility of proportionate reversal w.e.f. 01.04.2008 to mitigate the difficulties faced by manufacturers to maintain separate accounts for inputs/ input services as well as when the same are commonly used for dutiable as well as exempted products/ services. Though detailed procedure starting with an option to be exercised by manufacturer has been prescribed, in the present case, the appellant has not followed the same. However, it is on record that they have already reversed an amount claimed to be proportionate. It is also pertinent to record that this has been done by the appellant even before the issue of the show cause notice in this case. We are of the considered view that the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given any finding as to whether the reversal already made satisfies the test of proportionate reversal in terms of quantum of reversal. Hence, we are of the considered opinion that the matter is to be remanded to the original adjudicating authority to verify whether the amount of cenvat credit already reversed alongwith interest satisfies the requirement of proportionate reversal. We also make it clear that there is no justification for demand of the amount equivalent to 10%/ 5% of the value of electricity wheeled out. The appellant should be given an opportunity to argue their case before the original adjudicating authority who is directed to pass order expeditiously within a period of three months of the date of receipt of this order.
6. The appeal stands disposed of by way of remand as above.
(Pronounced on 08.12.2016).
(Justice (Dr.) Satish Chandra)
President
(V. Padmanabhan)
Member (Technical)
Pant