Custom, Excise & Service Tax Tribunal
M/S. Hydac (India) Pvt.Ltd vs Commissioner Of Central Excise, ... on 23 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/739/10 [Arising out of Order-in-Appeal No. YDB/68/Bel/2010 dtd. 4/2/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai, Zone II] For approval and signature: Honble Mr Ramesh Nair, Member (Judicial) =======================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should 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 : seen
of the Order?
4. Whether Order is to be circulated to the Departmental: Yes
authorities?
=======================================================
M/s. Hydac (India) Pvt.Ltd.
:
Appellants
VS
Commissioner of Central Excise, Belapur-III
:
Respondent
Appearance
Shri. Atul Pachkhede, Consultant for the Appellants
Shri. V.K. Shastri, Asstt. Commissioner (A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 23/6/2015
Date of decision: 23/6/2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in-Appeal No. YDB/68/Bel/2010 dtd. 4/2/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai, Zone II, wherein Ld. Commissioner (Appeals) sustained the demand confirmed by the original authority in term of Rule 6(3) of CCR, 2004.
2 The facts of the case are that the appellant is engaged in the manufacture of both dutiable and exempted goods. During the audit of factory records of appellant by Central Excise Revenues audit, it was observed that appellant had not maintained separate account of input service for exempted and dutiable category of goods as required under Rule, 6(3)(a) of CCR, 2004. The input service on which Cenvat Credit availed, was used in dutiable as well as excerpted goods, therefore appellant was liable to pay an amount equivalent to 10% of the value of such exempted final product cleared by them in terms of Rule 6(3)(a) of CCR, 2004. Show cause notice was issued proposing demand of an amount @ 10% of the value of exempted final product which comes to Rs. 4,61,154/-, interest under Section 11AB was also demanded and both the amount was proposed to be appropriated against the payment already made. Show cause notice also proposed to impose penalty of equal amount under Rule 15(3) of CCR, 2004 read with Section 11AC of the Central Excise Act, 1944. Show cause notice was adjudicated wherein the demand of Cenvat Credit of Rs. 4,61,1154/- was disallowed and appropriated the same against amount of the equal amount already paid and interest Rs. 1,16,936/- was also confirmed and appropriated against the amount already paid. In addition, a penalty of Rs. 4,61,154/- under Rule 15(3) of CCR, 2004 read with Section 11AC of Central Excise Act, 1944 was also imposed. Aggrieved by the said order in original dated 6/1/2009 the appellant filed appeal before the Commissioner (Appeals) after payment of 25% of the penalty under Section 11AC within one month of the original order in order to avail benefit of reduction of 75% penalty under Section 11AC. Ld. Commissioner (Appeals) upheld order in original however giving the benefit of first proviso to Section 11AC the penalty stood reduced to Rs. 1,15,300/-.
3. Shri. Atul Pachkhede, Ld. Consultant for the appellant submits that the period involved in the present case is 2006-07 during which exempted goods were cleared under Notification No. 10/97-CE dated 1/3/1997 on which the 10% demand was raised. It is his submission that the appellant have debited an amount of Rs. 4,61,154/- on 3/5/2008 and also paid interest of Rs. 1,16,936/- on 13/5/2008. The said amounts have been paid before issuance of show cause notice. It is his submission that in terms of retrospective amendment of Rule 6 by Section 73(1) of the Finance Bill, 2010, it has been provided that whether the dispute relating to adjustment of credit on input or input service used in or in relation to exempted final product relating to the period beginning on 10th Sep 2004 and ending with 31 March 2008 is pending on the date on which Finance Bill 2010 received the assent of the President and notwithstanding anything contained in sub rule (1) and(2) and clause (a) and (b) of sub rule 3, manufacturer availing Cenvat Credit in respect of any input or input service and manufacturing final product which are chargeable to duty and also other final product which are exempted goods may pay an amount equal to Cenvat Credit attributed to input or input services used in or in relation to the manufacture of the exempted goods provided that manufacturer shall pay interest @ 24% per annum till the date of payment of the said amount. He submits that in view of this retrospective amendment, the appellant was required to pay only an amount equal to Cenvat Credit attributable to the input or input services used in or in relation to the manufacture of the exempted goods. Therefore the demand, in terms of said statutory provisions should be restricted only to the actual Cenvat Credit and therefore demand of amount equivalent to 10% of the value of exempted goods is not tenable. He produced Chartered Accountants Certificate of M/s. Hingorani & Associates for the period 2006-07 showing total Cenvat Credit attributed to the input services comes to Rs. 14,656/- therefore demand is not sustainable. In support of his above submission, he placed reliance on following judgments:-
(a) Shree Rama Multi Tech Ltd. Vs. Union of India[2011(267) ELTL 153 (Guj)]
(b) M/s. IPCA Laboratories Ltd Vs. Commissioner of Central Excise, Indore [2015-TIOL-1097-CESTAT-DEL]
(c) Commissioner of Central excise, Salem-I Vs. Burn Standard Co. Ltd.[2013(294) ELT 389(Mad.)] On the query from the bench that whether application availing benefit of retrospective amendment of Rule 6 was made to the proper officers, he submits that no such application was made however important requirement is to pay the amount equal to Cenvat Credit attributed to the input or input services used in the exempted goods alongwith interest @ 24%. Since the appellant had paid an amount which is more than required payment the condition of the retrospective amendment stand fulfilled and therefore provision of retrospective amendment of Rule 6 should be made applicable to them.
4. On the other hand, Shri. V.K. Shastri, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order.
5. I have considered the submissions made by both sides and perused the record.
6. I find that the appellant have availed the Cenvat credit in respect of input service used in the dutiable and exempted goods but by virtue of retrospective amendment in Rule 6 by Finance Bill, 2010 the appellant was required to pay an equal amount of Cenvat credit in respect of input services used in the exempted goods. As per the submission of the Ld. Consultant for the appellant and production of C.A. certificate, it is noticed that amount to be deposited in terms of retrospective amendment comes to Rs. 14,656/- and the appellant is required to pay interest @ 24% on Rs. 14,656/-. It is observed that the appellant has paid much more than the amount required to pay on 13/5/2008, which is within the stipulated time period of six months from the date on which Finance Bill, 2010 received the assent of the President. Therefore dispute involved in the present case must stand settled with the payment of equal mount of Cenvat Credit i.e. Rs. 14,656/- alongwith interest @ 24%. On going through judgment cited by the Ld. Consultant, I find that very same issue has been dealt in three judgments wherein it was held has under :
(a) SHREE RAMA MULTI TECH LTD.
Versus UNION OF INDIA 2011 (267) E.L.T. 153 (Guj.)
14. The dispute in? the present case relates to the entitlement of the petitioners to reverse proportionate amount of credit in respect of the final product carrying nil rate of duty. At the relevant time, in the light of the provisions of Rule 57CC of the Rules, the entitlement of the petitioner to reverse the credit to the extent of common inputs used in the manufacture of goods which carried nil rate of duty was in doubt. However, subsequently, by the introduction of Rule 57CCC of the Central Excise Rules, the situation has been taken care of inasmuch as the said rule which has been given retrospective effect from 1996 provides for reversal of the actual credit by the manufacturer availing credit of specified duty in respect of inputs used for manufacture of final products which are chargeable to duty as also other final product which are not chargeable to duty or chargeable to Nil rate of duty, by payment of amount equivalent to the credit attributable to input used in or in relation to the manufacture of such final products which are not chargeable to duty or chargeable to nil rate of duty before or after the clearance of such goods. Sub-section (2) of Section 69 of the Finance Act, 2010 provides that where a person opts to pay the amount in accordance with the provisions of Central Excise Rules, 1944 as amended by sub-section (1), he is required to pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documents as laid down therein within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President.
15. Examining the? facts of the present case in the light of the newly amended statutory scheme, in the present case the petitioners were bona fide prosecuting theremedy before this Court, hence, pending the petition they have not made any application as contemplated under sub-section (2) of Section 69 of the said Act. It is the case of the petitioners that they are not required to make any such application since they have already reversed the amount of credit taken in respect of the common input used in the manufacture of product carrying nil rate of duty. However, in the light of the amended provisions of the Central Excise Rules, 1944 it is not necessary to consider the rival contentions on merits since the amended provisions take care of a situation like the present one.
16. In view of the? above discussion, keeping in view the amended provisions of the Central Excise Rules, 1944 as amended by Section 69 of the Finance Act, 2010, the petition is required to be allowed in the following terms:
(i) The impugned order dated 30th March 2000 passed by the respondent No. 3, Assistant Commissioner, Central Excise, Ahmadabad is hereby quashed and set aside.
(ii) The matter is restored to the file of the Adjudicating Authority who, after giving due opportunity of hearing to the petitioners, shall re-determine the credit taken on the common input, viz., ink, insofar as the same relates to the demand raised by the two show causes notices referred to in the impugned order.
(iii) The petitioners shall produce the necessary evidence in the form of certificate from a Chartered Accountant or a Cost Accountant for the relevant period certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of final product which are exempt from the whole duty or chargeable to Nil rate of duty along with other documentary evidence for the relevant period.
(iv) If any further credit is required to be reversed, the same shall be reversed within four weeks from the date of receipt of communication from the respondents.
Rule is made absolute to the aforesaid extent with no order as to costs.
(b) COMMISSIONER OF CENTRAL EXCISE, SALEM-I Versus BURN STANDARD CO. LTD.
2013 (294) E.L.T. 389 (Mad.)
11.?Thus, the question that has to be considered is as to whether the reversal of the credit for the month of March 2008 was taken on the basis of the formula provided for and in accordance with Section 73(2) of the Finance Act, 2010. In the decision reported in 2011 (267) E.L.T. 153 (cited supra), the Gujarat High Court considered a similar situation. There printing ink was used in the manufacture of dutiable plastic material and exempted labels and separate account under Rule 57C of the Rules was not maintained. The Gujarat High Court observed as follows :
8.?Rule 57C of the Rules laid down that no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Rule 57CC of the Rules as it stood at the relevant time made provision for Adjustment of credit if final products are exempted. Under the said rule where a manufacturer was engaged in the manufacture of any final product which was chargeable to duty as well as any other final product which was exempt from the whole of the duty of excise leviable thereon or was chargeable to nil rate of duty and the manufacturer took credit of the specified duty on any input (other than inputs used as fuel) which was used or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (2) are complied with, pay an amount equal to eight per cent of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of goods at the time of clearance from their factory by adjustment in the credit account maintained under sub-rule (3) of Rule 57G or in the accounts maintained under Rule 9 of sub-rule (1) of Rule 173G or if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of the credit under Rule 57A. Sub-rule (2) thereof provided that in respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use the inputs for the aforesaid purpose and does not take credit of the specified duty on such inputs.
12.?Section 69(2) of the Finance Act, 2010 brought in Rule 57CCC, which provided for making such reversal of the entry for the period from September, 1996 to 28th February, 1997, a manufacturer availing credit in respect of any input other than input used as fuel and manufacturing final products chargeable to duty and products not chargeable to duty or chargeable to interest rate, shall pay an amount equivalent to such credit attributable to inputs used in, or in relation to the manufacture of, final products chargeable to nil rate, or no rate, before the clearance of goods. Such assessees would have to make an application for the same within six months of the enactment of the Bill along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of final products which are exempted from the whole of the duty or chargeable to Nil rate of duty, within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. The Finance Bill, 2010 has received the assent of the President on May 2010. Admittedly, the assessee did not make the application on account of the pending proceedings before the Court. Thus, considering the said fact, the High Court pointed out to the contention of the assessee that they were not required to make any such application on account of the reversal of the credit already taken and held that considering the amended Rule as to the availability of the benefit as contemplated under Section 69 of the Finance Act taking care of such situation and the fact that the amendment came during the pendency of the appeal, the proper course was to remand the matter back to the Adjudicating Authority to re-determine the credit taken on the common input insofar as it related to dutiable goods and exempted goods and the goods chargeable to nil rate. The High Court directed the assessee to produce necessary evidence in the form of a certificate from a Chartered Accountant or a Cost Accountant for the relevant period on the amount of input credit attributable to the inputs used in or in relation to the manufacture of final product, which are exempt from the duty, along with the other documentary evidence for the relevant period.
13. ?We respectfully agree with the decision of the Gujarat High Court reported in 2011 (267) E.L.T. 153 (cited supra). Thus, on the line of reasoning of the Gujarat High Court, we hold that as on the date of the adjudication order and on the date of filing the appeal too, Section 73(2) itself was not available and that it was amended under the Finance Act, 2010 only during the pendency of the appeal. Thus, with the bona fide prosecution of the appeal, we do not find any justifiable ground to accept the stand taken by the Revenue that in the absence of compliance of the conditions in Section 73(2) of the Finance Act, 2010 within the six months period, the claim of the assessee has to fail. The question of such a compliance as on the date of adjudication or filing of the appeal not being there, when the Tribunal felt, on facts, that it was necessary to remand the matter back to the Adjudicating Authority. Thus, we have no hesitation in confirming the order of remand restoring the matter back to the Adjudicating Authority to consider the claim of the assessee. We direct the assessee to produce necessary evidence in the form of certificate from a Chartered Accountant or a Cost Accountant for the relevant period, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of final product, which are exempt from the duty, along with documents on the reversal of entry made before the Adjudicating Authority.
14.?Accordingly, the civil miscellaneous appeal is dismissed. No costs. Consequently, the above MP is also dismissed.
(C) 2015-TIOL-1097-CESTAT-DEL
M/s IPCA LABORATORIES LTD
Vs
COMMISSIONER OF CENTRAL EXCISE, INDORE
6. The appellant used 6 common input services which are used in or in relation to manufacture of dutiable final product as well as exempted final product. During the period of dispute, the total cenvat credit attributable to these common input service is Rs. 15,52,417/-. However, there is no dispute that during previous financial year, the proportion of the turnover of exempted final product was 70% and on this basis during the period of dispute, the appellant have foregone 70% of the cenvat credit in respect of these mix common input services and accordingly, have availed cenvat credit of Rs. 4,65,725/- attributable to the input services used in or in relation to the manufacture of the dutiable final product and have foregone the cenvat credit of Rs. 10,86,692/- in respect of the services used for exempted final product. The point of dispute is and whether just because the appellant did not maintain separate account and inventory of the input services meant for dutiable and exempted final product as per the provision of Rule 6(2), the provisions of Rule 6(3)(b) providing for payment of an amount equal to 10% of sale value of the exempted final product would be applicable.
6.1. In our view w.e.f. 01.03.2008 Rule 6(3) had been amended to give an additional option to a manufacturer manufacturing dutiable as well as exempting final product by using common cenvat credit availed input/ input services and this additional option was to reverse the proportionate cenvat credit attributable to input/ input services used in or in relation to manufacture of exempted final product. The proportionate amount of cenvat credit attributable to the input/ input services used in or in relation to manufacture of exempted final product was to be calculated as per the formula prescribed in Rule 6(3A). By Finance Act, 2010, the above provisions were made retrospectively applicable. Hon'ble Gujarat High Court in case of Sh. Rama Multitech Ltd. vs UOI reported in 2011 (267) ELT 153 Guj = 2011-TIOL-940-HC-AHM-CX has held that even if a separate account have not been maintained, in view of retrospective amendment by Finance Act, 2010, a manufacturer using common inputs in or in relation to manufacture of dutiable as well as exempted final product would be entitled to reverse the proportionate cenvat credit. In view of this position, during the period of dispute the option of paying an amount equal to 10% of the sale value of the exempted goods cannot be forced upon the appellant and the appellant would be entitled to reverse the cenvat credit attributable to the inputs/ input services used in or in relation to the manufacture of the exempted final product. According to the appellant, they have not taken and have foregone the cenvat credit attributable to the quantum of input services, attributable the turnover of exempted final product and this fact is not disputed. The Commissioner does not even dispute the quantum of the credit foregone. Once, the appellant have foregone the proportionate cenvat credit in respect of input services used in or in relation of the manufacture of exempted final product, they have to be treated as complied with the provisions of sub Rule (3) of Rule 6 and hence, there cannot be any demand of amount under Rule 6(3)(b). The judgment of Hon'ble Bombay High Court in case of CCE Thane-I vs. Nicholas Piramal (India) Ltd.(Supra) is of the period when the retrospective amendment to Rule 6(3) by Finance Act, 2010 had not been made and hence, this judgment of Hon'ble High Court is not applicable to the facts of this case. In view of the retrospective amendment introduced by Finance Act, 2010, the appellant were entitled to reverse the proportionate cenvat credit attributable to the quantum of input services used in or in relation to manufacture of exempted final product and by foregoing this credit, they have complied with this obligation. In view of this the impugned order is not sustainable. The same is set aside. The appeal is allowed.
From the above judgments it is settled that if the equal amount of Cenvat Credit alongwith interest attributed to the input and input services used in exempted goods is paid alongwith 24% interest compliance of retrospective amendment is made and thereafter no further demand can be made. As regard the application to be made before the departmental authority for availing such benefit. I am of the view that departments role is only of verification of the actual amount to be reversed alongwith 24% interest. Since in the present case the amount alongwith 24% interest stand paid within stipulated time period as provided under the retrospective amendment to Rule 6, the only issue left is verification of the quantum of equal amount of Cenvat Credit i.e. Rs. 14,656/- alongwith interest as presented by the appellant. In view of the above discussion and settled legal position and also on the statutory provisions made under Finance Act, 2010. I am of the considered view that demand confirmed by the original authority and upheld by the Ld. Commissioner (Appeals) alongwith penalties is not sustainable; therefore the same is set aside. However, amount of Cenvat Credit i.e. Rs. 14,656/- alongwith interest @ 24% thereon shall be adjusted from the amount of Cenvat Credit and interest already paid by the appellant. Since the lower authority has not considered quantification of actual amount of Cenvat Credit attributed to the input services used in the manufacture of exempted goods at the time of issuance of show cause notice, Adjudication order and order in appeal, the matter needs to be remitted back to the original authority for limited purpose that original authority shall verify the actual Cenvat Credit of Rs. 14,656/- and interest @24% p.a. thereupon and the same shall be adjusted against amount of Cenvat of Rs. 4,61,154/- and interest 1,16,936/- already paid by the appellant. Appellant has the liberty to claim refund of the balance amount if any and the adjudicating authority shall dispose of such claim in accordance with law. The appeal is allowed by way of remand to the adjudicating authority in above terms.
(Operative part pronounced in court) Ramesh Nair Member (Judicial) sk 13