Custom, Excise & Service Tax Tribunal
M/S Shree Rajasthan Syntex Ltd vs Cce, Jaipur Ii on 20 February, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Excise Appeal No. 398-399 of 2011 (SM) [Arising out of the Order-in-Appeal No. 399-400 (CB)/CE/JPR-II/2010 dated 19/11/2010 passed by The Commissioner, Central Excise Commissionerate, Jaipur.] For Approval and signature : Honble Shri Rakesh Kumar, Member (Technical) 1. Whether Press Reporters may be allowed to see : the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of : the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair : copy of the order? 4. Whether order is to be circulated to the : Department Authorities? M/s Shree Rajasthan Syntex Ltd. Appellant Versus CCE, Jaipur II Respondent
Appearance Shri B.L. Narasimhan, Advocate for the appellant.
Ms. Shweta Bector, Authorized Representative (DR) - for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 20/02/2013.
Final Order No. 55705-55706/2013 Dated : 20/02/2013 Per. Rakesh Kumar :-
The appellant are manufacturers of spun yarn of synthetic fibre, artificial staple fibre and cotton yarn. During the period of dispute, they were availing of exemption under Notification No. 29/2004-CE as well as 30/2004-CE. Under Notification No. 29/2004-CE, the duty payable by a manufacturer on textile products manufactured by him is 4% adv. without any condition while under Notification No. 30/2004-CE the duty payable on the textile items manufacture is nil, but the nil rate is subject to condition that the manufacturer shall not avail Cenvat credit in respect of in inputs or capital goods used in or in relation to the manufacture of the final products. There is no dispute that in this case the appellant has not availed any input duty credit or capital goods credit. However, the appellant during the period of dispute had availed Cenvat credit of the service tax paid on various input services like insurance, tele-communication, repair and maintenance etc. availed by them which were used in or in relation to the manufacture of their final product. Since the appellant using these Cenvat credit availed common services were manufacturing and clearing dutiable as well as fully exempted final product and since they were not maintaining separate account of the input services used for dutiable and exempted final products, the department by issue of show cause notices sought complete denial of the Cenvat credit in respect of input services and its recovery alongwith interest and also the imposition of penalty. The Jurisdictional Assistant Commissioner by two separate orders dated 18/11/09 and 29/1/10 confirmed the Cenvat credit demands of Rs. 1,20,621/- and Rs. 48,047/- respectively alongwith interest and imposed penalties of equal amount on the appellant under Rule 15 of Cenvat Credit Rules, 2004 readwith Section 11AC of Central Excise Act, 1944. On appeals to Commissioner (Appeals), these orders were upheld in toto by two separate orders-in-appeals each dated 19/11/2010. Against these order-in-appeals these appeals have been filed.
2. Heard both the sides.
3. Shri B.L. Narasimhan, Advocate, the learned Counsel for the appellant, pleaded that while availing Notification No. 30/2004-CE the prohibition is only on availing Cenvat credit of Central Excise duty paid on inputs and capital goods and, as such, there is no prohibition on availing service tax credit in respect of input services, that the appellant even though using common input services in respect of dutiable and exempted final products, were eligible for the Cenvat credit, in question, in view of explanation to Rule 3 of the Cenvat Credit Rules, 2004, according to which where the provisions of any other rule or notification provide for grant of whole or part exemption on condition of non-availability of credit of duty paid on any input or capital goods, or of service tax paid on input service, the provisions of such other rule or notification shall prevail over the provisions of these rules, that in view of the explanation to Rule 3, the appellant would be eligible for service tax credit, as the Notification No. 30/2004-CE permits full duty exemption even when the Cenvat credit of service tax paid on input services had been availed, that the department cannot deny Cenvat credit by invoking Rule 6 of the Cenvat Credit Rules, that in any case there is no justification for denial of entire Cenvat credit when there is no dispute that part of the goods cleared were on payment of duty and in any case if Rule 6 (1) is invoked, the Cenvat credit can be denied only to the extent the input services, in question, were used in or in relation to manufacture of exempted final products. He, therefore, pleaded the impugned orders are not sustainable.
4. Ms. Shweta Bector, the learned Departmental Representative, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that explanation to Rule 3 of the Cenvat Credit Rules does not mean that a manufacturer would be eligible for Cenvat credit in respect of the inputs which has been used in manufacture of fully exempted final product, that the Cenvat Credit Rules, 2004 have to be read as a whole and, as such, Rule 3 providing for Cenvat credit of various duties of excise has to be read with Rule 6, that since the appellant have not maintained separate account of the input services used in or in relation to the manufacture of dutiable final product and fully exempt final product, the department had correctly denied the entire amount of Cenvat credit. She, therefore, pleaded that there is no infirmity in the impugned order.
5. I have considered the submissions from both the sides and perused the records.
6. The undisputed facts are that the appellant have cleared the spun yarn manufactured by them by availing full duty exemption under Notification No. 30/2004-CE in which the exemption is applicable subject to non-availment of input duty credit and capital goods credit and have also cleared goods on payment of duty @ 4% adv. under Notification No. 29/2004-CE for which there is no condition regarding non-availment of credit. There is also no dispute that the appellant have not availed any input duty credit or capital goods credit and have availed the Cenvat credit of only the service tax paid on various input services. Notification No. 30/2004-CE for availment of full duty exemption does not bar the availment of service tax credit. The service tax credit in this case, however, is sought to be denied on the ground that by using the common Cenvat credit availed services, the appellant have manufactured dutiable as well as fully exempted final product but have not maintained separate account in this regard. In my view, since common Cenvat credit availed services have been used in or in relation to the manufacture of dutiable and exempted final product and since separate account have not been maintained in respect of services used for dutiable and exempted final product, the provisions of Rule 6 providing for reversal of the proportionate credit would be applicable and in such a situation, instead of denying the entire credit the department should have denied only the proportionate credit i.e. the Cenvat credit in proportion to the value of the exempted final products. I do not accept the appellants plea that in view of explanation to Rule 3 they are eligible for Cenvat credit in respect of input services, which were used in relation to the manufacture of exempted final product, as what this explanation provides is that even if a manufacturer on the basis of the provisions of Rule 3 is eligible for Cenvat credit in respect of certain inputs or capital goods or input services, he would not be entitled to the credit, if he is availing some exemption notifications in which as a condition of the exemption notification, he cannot avail the Cenvat credit. In my view, Rule 3 of the Cenvat Credit Rules has to be read with Rule 6 and since in this case common Cenvat credit availed services have been used in or in relation to manufacture of dutiable as well as fully exempted final product, the appellant would not be entitled for the Cenvat credit to the extent the input services were used in the manufacture of fully exempted final products. Accordingly, the impugned order is set aside and the matter is remanded to original Adjudicating Authority for re-quantification of Cenvat credit demand which would be in proportion to the value of exempted final product cleared by the appellant. The quantum of penalty would be in proportion to the re-quantified Cenvat credit demand.
(Pronounced in the open court.) (Rakesh Kumar) Member (Technical) PK ??
??
??
??
6