Custom, Excise & Service Tax Tribunal
Arti Bakery Pvt Ltd vs Bolpur on 12 June, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.75743 of 2017
[Virtual Mode of Hearing]
(Arising out of Order-in-Original No.17/COMMR/BOL/2017 dated 08.02.2017 passed
by Commissioner of Central Excise & Service Tax, Bolpur.)
M/s. Arti Bakery Pvt.Ltd.
(DVC Sub-Station Road, Ningha, P.O.-Kalipahari, Asansol-713339.)
...Appellant
VERSUS
Commissioner, CGST & CX, Bolpur Commissionerate
.....Respondent
(Nanoor Chandidas Road, Sian, Bolpur, Dist: Birbhum, West Bengal, Pin-731204.) APPEARANCE Ms. Rinki Arora & Mr. Mayur Jain, Advocates for the Appellant (s) Shri S. Dey, Authorized Representative for the Revenue CORAM: HON'BLE SHRI R. MURALIDHAR, MEMBER(JUDICIAL) HON'BLE SHRI RAJEEV TANDON, MEMBER(TECHNICAL) FINAL ORDER NO. 76618/2025 DATE OF HEARING : 12.06.2025 DATE OF DECISION : 12.06.2025 Per : RAJEEV TANDON :
Aggrieved by the Order-in-Original No.17/COMMR/BOL/2017 dated 08.02.2017 confirming demand of duty of Rs.8,60,60,485/- along with interest apart from imposition of penalty of equal amount under 2 Excise Appeal No.75743 of 2017 the provisions of Rule 14 of the Cenvat Credit Rules, 2004, the appellant has filed the impugned appeal.
2. The appellant is a manufacturer of biscuits falling under Tariff Item No.1505 31 00 and/or 1905 90 20 for and on behalf of M/s. Parle Biscuits Ltd. and M/s. Parle Products Pvt. Ltd. (hereinafter referred to as principal manufacturers). The manufactured goods were cleared by the appellant on payment of duty on the sale price and/or MRP as decided and communicated by the principal manufacturers. The appellant manufactures both dutiable and exempted biscuits - details of which are as under :-
Dutiable Biscuit Exempted Biscuit
Top (90 gm) Top (25 gm)
Krack Jack (80 grams/40 Krack Jack (50.4 gram/100.80 gram & 200 gram) gram & 250 gram) Top Spin (90 gram)
3. The issue involved in the present appeal rests on a very narrow compass i.e. whether presumptive tax @ 6% of exempt biscuits in terms of Rule 6(3) of Cenvat Credit Rules, 2004 is payable on the grounds of non-maintenance of separate accounts as envisaged in terms of Rule 6(2) and non-exercise of option under Rule 6(3A)(a) of Cenvat Credit Rules, 2004, despite the appellant not taking proportional credit attributable towards exempt goods manufactured by them. Related questions pertaining to invocation of extended period as well as 3 Excise Appeal No.75743 of 2017 imposition of penalty on the appellant also arise for consideration in terms of show cause notice issued to the appellants.
4. A show cause notice for the period 01.04.2012 to 31.03.2015 has been issued to the appellant in the matter. The appellant has submitted that till December 2012, they were manufacturing only exempted goods and hence had not availed any Cenvat Credit on the inputs. They further submit that w.e.f. January 2013 they started producing both dutiable and finished goods and cleared in packaged form, with particular Kg. retail sale price (RSP) as were exempt in terms of Notification No.12/2012-CE(NT) dated 17.03.2012 at Sl.No.27.
5. After due process, the show cause notice issued as aforestated was confirmed vide impugned Order-in-Original and an amount of Rs.16,86,679/- as stood paid by the noticee was adjusted against the aforesaid total demand referred in para 1 above.
6. We have heard both sides and perused the case records.
7. The point for consideration therefore is whether Rule 6 of the Cenvat Credit Rules gets attracted in the matter in view of the specific facts of the present case and if so to what consequences. The appellant has emphasized that they availed the Cenvat Credit on the inputs attributable to and used exclusively in the manufacture of dutiable goods, upon receipt of such inputs under cover of the appropriate duty paying documents. They emphasized that credit in respect of inputs used exclusively for manufacture of exempt goods has not at all been availed by them. In so far as common cenvatable inputs are concerned, the appellant submits that though they are accounted in RG-23A part-I 4 Excise Appeal No.75743 of 2017 (quantitative account), but corresponding credit is not taken in RG-23A part-II at the time of receipt of the inputs, despite being in possession of proper duty paying documents. It is their case that at the close of the calendar month, the appellant takes proportionate cenvat credit on such inputs as are used for manufacture of dutiable goods. It is only on manufacture of dutiable goods that proportionate credit is taken on such quantity of common inputs that go directly in the production of such dutiable biscuits. As for the credit on advertisement and sales promotion service is concerned, the credit attributable to exempt biscuits is not taken and it is only the credit attributable to dutiable biscuits alone that is taken. In support of this proposition the appellant has also tendered the Chartered Accountant's Certificate. It is further their case that all these contentions were in the knowledge of the departmental officers and no fact pertaining to the aforesaid matter was ever concealed. They submit that they were subjected to audit who had taken note of the said practice and no objections thereto was ever issued in the matter. It is therefore, that the appellant submits that there is no violation of the provisions of Rule 6 of the Cenvat Credit Rules and that the various sub-Rules thereof have all been taken care of inasmuch as Rule 6(1) stands complied by not availing of Cenvat credit and therefore there is no reason to seek recourse to Rule 6(2) or Rule 6(3) of the said Rules.
8. As for the availment of credit on common inputs proportionate to quantity used in dutiable final products, the appellant contends that during the period January 2013 to March 2015 the credit was taken on 5 Excise Appeal No.75743 of 2017 common inputs proportionate to the quantity used in dutiable final products only and vehemently affirms non-availment of any credit on inputs consumed in the manufacture of final products. It is therefore their case that since credit of full duty paid on common inputs was not availed, no reversal of credit was either warranted, nor carried out on a monthly basis. The appellant has however availed credit on Input Service Distributor's (ISD) invoice issued by the principal manufacturer in the months of February and March, 2014 pertaining to input service of advertisement and sales promotion. As for the common inputs used by the appellant in the manufacture of both dutiable and exempted biscuits like sugar, amonia bicarbonate, sodium bicarbonate, butter flavor, Finamul it is their case that out of these five common inputs they availed credit only in respect of two such inputs i.e. Finamul and butter flavor and no credit of duty was availed in respect of other three products stated above. In respect of said common inputs on which credit was availed the same works out to as under :
Sr.No. Period Duty paid on Proportionate
common inputs Net credit taken
(Rs.) (Rs.)
1. January, 2013 to March, 2013 2,20,225/- 34,517/-
2. April, 2013 to March, 2014 15,12,994/- 1,25,999/-
3. April, 2014 to March, 2015 13,81,065/- 3,99,335/-
Total: 31.14,284/- 5,59,851/-
9. It is further their case that as since the credit taken on proportionate basis, being on the higher side, out of the credit reversed of Rs.17,37,279/- in accordance with the ratio of the inputs in the 6 Excise Appeal No.75743 of 2017 exempted final products produced and paid along with interest @ 18%, as also with respect to input service whereby the appellant reversed such credit of Rs.25,52,764/- along with interest, they cannot be considered to be violative of the legal stipulations. Likewise they also submit that they had reversed the credit on Top Spin Flavor, used in the manufacture of biscuits, which was taken in March 2014 to the tune of Rs.11,001/- along with applicable interest. It is therefore their case that though admittedly they had not filed any option letter as required in terms of Rule 6, but the fact that the appellant had availed credit on common inputs as a proportion, to the extent of such quantity gone into the manufacture of dutiable goods, which credit was of course undisputedly admissible to them, cannot be lost sight of.
10. From the foregoing it is apparently clear that though the appellants have entered the cenvatable products in their RG-23A Part-I the credit availed in RG-23A Part-II is restricted to the extent of such inputs being a part/component of the dutiable finished goods. In support of the proposition for cenvat credit on inputs services, the appellants have tendered a certificate from the Chartered Accountant clearly amplifying availment of cenvat credit only in respect of such services pertaining to dutiable finished goods. It is therefore clear from the aforesaid that the appellants are not taking cenvat credit on inputs/inputs services that are exclusively used for manufacture of exempt biscuits. As for the common inputs used for manufacture of dutiable and exempted goods, Rule 6(3) of the Cenvat Credit Rules provides taking entire cenvat credit and in case of the option having 7 Excise Appeal No.75743 of 2017 been exercised, following the procedure of reversal in respect of the exempted goods component as prescribed in law. It is a fact on record that appellant do not take credit on the common inputs immediately upon receipt of the same and such credit is availed only after ascertaining and working out the quantum attributable to dutiable goods produced during a particular month. Such a practice of availing credit restricted to only credit as admissible for inputs gone into the manufacture of dutiable goods cannot be faulted, rather is in consonance with the apex court's decision in the case of Maruti Suzuki v. Commissioner of Central Excise, Delhi-III [2009 (240) ELT 641 (SC)].
11. The fact that no proportionate amount of credit on input/input services attributable to exempt biscuit is taken, can safely lead us to conclude that there is no contravention of Rule 6 of the Cenvat Credit Rules, as no credit on exempted product is taken. As for the cases where such credit attributable to exempt goods has actually been taken initially and reversed subsequently we find that the law stands settled in this regard by the decision of hon'ble apex court in the case of Chandrapur Magnet Wires v. Collector of Central Excise, Nagpur [1996 (81) ELT 3 (SC) as well as Hello Minerals (P) Ltd. v. Union of India [2004 (174) ELT 422 (All.).
12. The practice as adopted by the appellant by not availing credit in proportion to exempt biscuits has also been found as to be legal and proper by this Tribunal (Orion Appliances Ltd. v. Commissioner of Service Tax [2010 (19) STR 205 (Tri.-Ahmd.)].
8
Excise Appeal No.75743 of 2017
13. In view of our discussions supra, we find that the order of the Commissioner is not in accordance with the law and thus is devoid of merits, in view of the factual situation as prevalent in the present case. While Rule 6(2) provides for maintenance of separate accounts in support of such common inputs/services, it cannot be denied that such maintenance of accounts can be exercised in ways more than one and as convenient to the appellant, as long as the same is clearly discernible.
14. A periodwise snapshot and its manner of compliance with legal prescriptions thus is as drawn out in the following table :
Period of SCN Compliance with Rule 6 of CCR, 2004 April 2012- December Manufactured only exempted biscuits &Cenvat credit on 2012 (FY 2012 -13) Inputs/ services not taken & hence Rule 6 of CCR not applicable January 2013 - March Credit taken on common Inputs proportionate to quantity 2013 (FY 2012 -13) of Inputs used in dutiable biscuits with credit on inputs exclusively used in dutiable final products. Separate account of inventory maintained in RGZ3A- Part-1 (Quantity Alc.) and Stock Reports as per Rule 6(2) of CCR,2004. The credit availed in excess to proportionate use INR 71,255/- Including Ed. Cess paid with Interest INR 27,1891/- vide GAR challan No. 00287 dated 30/4/2015 & Informed the Range vide letter dated 30/4/2015. Also, excess credit noticed of INR 90,988/ Including Ed. Cess has been reversed vide PLA Debit Entry No. 4 dated 14/10/2016 and interest of INR 1,22,847 / paid (@ 18% for 1351-days) vide PLA debit entry No. 5 dated 14/10/2016.
No credit taken on input service during period January 2013 to March 2013.
April 2013 - March Credit taken on common Inputs proportionate to quantity 2014 (FY 2013 - 14) of Inputs used in dutiable biscuits with credit on inputs used exclusively in dutiable final products. Separate account of inventory maintained in RG23A- Part-1 (Quantity A/c) and Stock Reports as per Rule 6(2) of CCR, 2004 The credit availed in excess to proportionate use Rs. 1,50,278/- has been reversed with interest of Rs. 44,950/- vide GAR-7 challan No. 00287 dated 30/4/2015 & informed Range vide our letter dt. 30/4/2015. Also, excess credit of Rs. 8,11,019/- noticed has been reversed vide PLA debit entry No. 6 dated 14/10/2016 and Interest of Rs. 3,85,587/- (@ 18% for 1262-days) paid vide PLA debit entry No. 7 dated 14/10/2016. On input services Cenvat credit taken only on the 9 Excise Appeal No.75743 of 2017 strength of ISD invoices issued by the Principal Manufacturer M/s. Parle Biscuits, during February, 2014 and March, 2014 with proportionate credit reversal done April 2014 - March Option under rule 6(3A) submitted vide letter dated 2015 (FY 2014 -2015) 14/10/14. Credit taken on common inputs proportionate to quantity of inputs used in dutiable biscuits with credit on inputs exclusively used in dutiable final products. Separate account of inventory maintained in RG23A- Part-1 (Quantity A/c/). Excess credit noticed of Rs. 4,59,022/- has been reversed with interest of Rs. 1,04,796/- (@18% for 532 days) vide GAR-7 challan No. 00208 dated 9/10/2015. Also excess credit of Rs. 1,54,717/- has been reversed vide PLA Entry No. 8 dated 14/10/2016 and interest of Rs. 67,107/- paid (@18% for 897-days) vide PLA debit entry No. 8 dated 14/10/2016. A final credit adjustment as per rule 6(3A)(c) (iii) of CCR,2004 is submitted to Range vide letter dated 5/5/2015 copy enclosed with option letter dated 14/10/2014 as Annexure-6
15. The appellants in their submissions in order to easily demonstrate the yearwise position of duty paid on common inputs vis-à-vis credit availed proportionately have submitted the following : 10
Excise Appeal No.75743 of 2017 From the above table it can be observed that out of total duty paid on common inputs the Appellant has availed lower credit as opposed to quantity of inputs use in dutiable biscuits.
Besides credit on common inputs, credit is taken on un-common/exclusively used inputs like Wrappers, Corrugated Boxes, Poly Bags in manufacture of dutiable biscuits as detailed in the statement enclosed at Annexure-7 to APB. The summery of credit taken on un-common/exclusive Inputs used during the period of SCN in dutiable final products is as follows:
Further it is submitted that credit on input-service was not availed except on the basis of Input Service Distributor (ISD) Invoice issued by the Principal Manufacturer M/s. Parle Biscuits Bahadurgarh- Haryana during February. 2014 and March 2014 only. The ISD invoices distributed credit of tax paid on input service of Advertisement & Sales Promotion availed to advertise / promote sales of Biscuits Tap and Krackjack manufactured at the factory The credit distribution is in terms of rule 7 of CCR,2004 as per details below:
The Cenvat credit of tax distributed & taken in February2014 and March 2014 is shown in ER 1 monthly return under column "Credit Taken on Input-Services". Since the input service Advertisement& Sales Promotion of Top and Krack Jack 11 Excise Appeal No.75743 of 2017 biscuits is related to those specific biscuit-brands, the services used are attributable to those specific brands only and not attributable to other biscuit brands.
The reversal of credit in respect of exempted quantity of biscuits of Top & Krackjack biscuits is reversed. The ratio of dutiable and manufactured and cleared during 2013- 14 when credit availed has been worked out as per rule 6(3A)(c)(iii) of CCR, 2004 is as follows:
The total tax paid on services used for Top Biscuits is Rs. 24,91,425/ as per ISD involves, the tax reversible as per formula under rule 6(3A)(c) (lii) of CCR comes to Rs. 73,80,307/- (Rs. 23,10,978/-ST Ed. Cess -3% - 69,329/-) and eligible credit is Rs. 1,11,118/-including Ed. Cess. Similarly tax paid on services used for Krackjack Biscuits as per ISD invoices is Rs. 5,76,973/- and as per formula under rule 6(31)(c) (ill) of CCR, the tax to be reversed comes to Rs. 1,72,157/- (Rs. 1,67,434/- ST + Ed. Cess-3% 5,023/-) and hence credit eligible is Rs. 4,04,516/. The total amount reversible on Top and Krackjack amounting to Rs. 25,52,764/- (24,78,112/- ST and Rs.-74,352/- Ed. Cess 3%) is paid under GAR-7 challan No. 12 Excise Appeal No.75743 of 2017 00113 dated 9/2/2016 with interest Rs. 8,32,260/- (for TOP Biscuits) and Rs. 60,281/- (for Krackjack Biscuits) total Rs. 8,92,541/- [@ 18% p.a. for 709 days for both amounts]. A copy of said challan No. 00113 dated 9/2/2016 is enclosed as Annex-9 to APB.
Apart. from the credit taken on Input-services under ISD invoices, no other credit taken on Input services at all during the SCN period.
16. Thus, in view of the aforesaid discussions and the factual aspects recorded above, we do not find any infringement of the provisions of Rule 6 of the Cenvat Credit Rules. Once it is established that the appellants have not taken cenvat credit of the duty paid on inputs or service tax credit of input services pertaining to exempt biscuits no case for violation of Rule 6(3) can be made applicable to them. Once the Cenvat credit itself is not taken, which fact comes out from records, naturally there is no cause for maintenance of separate records, since the very fact of non-availment of Cenvat credit is sufficient to establish compliance with the legal position. We are also supported in this regard by the following decisions of the Tribunal in this regard.
(a) Bhoomi Sudhar Chemical Industries v. Commr. of C.Ex., Chandigarh [2013 (292) ELT 526 (T)]
(b) GB Bakers Ind. P. Ltd. v. CCE, C & ST-Hyderabad-III [2014 (208) ELT 777 (T)]
17. Further, in any case when the appellant has been regularly filing their returns, maintaining details in RG-23A Part-I & Part-II, as discussed supra, no case of suppression for invocation of extended period can be made out against them. Also the appellant were subjected to audit by the department during the intervening period and no such objection taken/anomaly detected. Thus, in view of the given 13 Excise Appeal No.75743 of 2017 situation no case of suppression/misstatement stands out against the appellant. Thus on this ground as well the show cause notice fails and the appellant would succeed.
18. In view of our findings and discussions the order of the lower authority is set aside and the appeal allowed with consequential relief, if any, as per law.
(Operative part of the order was pronounced in the open Court.) Sd/ Sd/ (RAJEEV TANDON) (R. MURALIDHAR) MEMBER (TECHNICAL) MEMBER (JUDICIAL) sm