Custom, Excise & Service Tax Tribunal
Himachal Futuristic Communications vs Cce, Chandigarh-I on 19 September, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 DIVISION BENCH COURT NO.1 Appeal No. E/933 & 1074/2007-Ex(DB) [Arising out of the OIO No.57/CE/CHD/06 dt.29.12.2006 and OIO No.47/CE/CHD/07 dt.22.2.2006 passed by the CCE, Chandigarh) Date of Hearing/Decision: 19.09.2016 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Devender Singh, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes Himachal Futuristic Communications Appellant Ltd. Vs. CCE, Chandigarh-I Respondent
Appearance Shri Rupender Singh, Advocate for the appellant Shri R.K.Sharma, AR the respondent CORAM:Honble Mr.Ashok Jindal, Member (Judicial) Honble Mr.Devender Singh, Member (Technical) FINAL ORDER NO.61395-61396/2016 PER: ASHOK JINDAL The appellants are in appeal against the impugned orders.
2. The brief facts of the case are that the appellants are engaged in the manufacture of telecommunication equipments and are located in the State of Himachal Pradesh. Initially the appellants were taking the credit on inputs and clearing their final products on payment of duty. Later on, on 1.12.2004 and 20.12.2004 respectively, the appellants opted the benefit of exemption Notification No.50/2003-CE dated 10.6.2003 (area based exemption) and cleared their goods without payment of duty. The Revenue is of the view that the appellant has opted area based exemption under Notification No.50/2003-CE dated 10.6.2003, therefore, the credit lying in their cenvat credit account on the said date is required to be reversed. In these sets of facts, the show cause notices were issued to the appellants which adjudicated and it was held that the appellants are required to reverse the credit lying in their cenvat credit account on the said date, they opted the area based exemption under Notification No.50/2003-CE dated 10.6.2003. Aggrieved with the said order, the appellants are before us.
3. Learned Counsel for the appellant submits that the issue is squarely covered by the decision of the Honble High Court of Himachal Pradesh in the case of United Vanaspati Ltd.-2010 (251) ELT 373 (H.P.) and Ranbaxy Laboratories Ltd.-2012 (279) ELT 194 (H.P). He also relied on the decision of this Tribunal in the case of H.M.T. 2008 (232) ELT 217 (Tri.LB). Therefore, he prayed that the impugned order is to be set aside.
4. Heard the parties and considered the submissions.
5. We find that the sole question for consideration is that whether the inputs lying in stock on the date on which exemption Notification No.50/2003-CE dated 10.6.2003 exempted final product, the appellant is required to reverse the credit lying in their stock or not.
6. The issue came up before this Tribunal in the case of H.M.T. (supra) wherein the larger bench of this Tribunal has observed as under:
20. On perusal of the Rule 6 of Rules, 2002 and the corresponding Rules, as mentioned above, we are of the view that the Appellants had correctly taken the credit and utilised, when the final product was dutiable and there is no requirement to reverse the credit on final product becoming exempt and such credit cannot be recovered under Rule 12 of Rules 2002 corresponding to Rule 57-I, 57AH of Rules 1944.
21.?We find that the different benches of the Tribunal have taken the similar view in the cases of C.N.C. Commercial Ltd. (supra) upheld by the High Court, Saboo Alloys Pvt. Ltd. (supra), Swastik Textile Engineers Ltd. (supra) and P.S.L. Ltd. (supra). We agree with the views expressed in the said decisions.
22.?In view of the above discussions, we hold that when the input-credit legally taken and utilised on the dutiable final products, need not be reversed on the final product becoming exempt subsequently w.e.f. 9-7-2004. The decision of the Bangalore Bench in the case of TAFE Ltd. (Tractor Division) v. CCE, Bangalore - 2007 (210) E.L.T. 571 (Tri.) = 2007 (79) RLT 706 (Tribunal-Bangalore) enunciated the correct position of the law. The issue is thus, answered in favour of the assessee and against the Revenue.
23.?Before we part, we observe that this order is passed without going into the submission of the Id. Advocate that the Notification No. 10/2007-C.E. (N.T.), dated 1-3-2007 inserted sub-rule (3) to Rule 11 of Rules 2004, is a specific provision for reversal of credit because such issue was not in the referral order.
7. The said issue also came up before the Honble High Court of Himachal Pradesh in the case of United Vanaspati Ltd.(supra) wherein the Honble High Court of Himachal Pradesh has observed as under:
7.?It is pertinent to mention here that the Apex Court in Collector of Central Exicse, Pune and others v. Dai Ichai Karkaria Ltd. and Others 1999 (112) E.L.T. 353 (S.C.) = 1999 (7) SCC 448 considered a similar question relating to the reversal of Modvat credit under Central Excise Rules, 1944. Rule 57H(5) of the said rules reads as follows :-
Where a manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by him under a notification based on the value or quantity of clearances in a financial year, and who has been availing of the credit of the duty paid on inputs before such option is exercised, he shall be required to pay an amount equivalent to the credit, if any, allowed to him in respect of inputs lying in stock or used in any finished excisable goods lying in stock on the date when such option is exercised and after deducting the said amount from the said amount from the balance, if any, lying in his credit, the balance, if any, still remains shall lapse and shall not be allowed to be utilized for payment of duty on excisable goods, whether cleared for home consumption or for export.
8.?After considering the Rule 57, the Apex Court held as follows :-
It is clear from these rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the rules which provides for a reversal of the credit by the Excise Authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilized, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no corelation of the raw material and the final product; that is to say, it is not as if credit can be taken only on a final product that is manufactured out of the particular raw material to which the credit is related. The credit may be taken against the excise duty on a final product manufactured on the very day that it becomes available.
9.?Rule 9(2) of the Cenvat Rules reads as follows :-
A manufacturer who opts for exemption from the whole of the duty of excise leviable on goods manufactured by him under a notification based on the value or quantity of clearances in a financial year, and who has been taking of cenvat credit on inputs before such option is exercised, he shall be required to pay an amount equivalent to the cenvat credit, if any, allowed to him in respect of inputs lying in stock or in process or contained final products lying in stock on the date when such option is exercised and after deducting the said amount from the balance, if any, lying in his credit, the balance if any, still remaining shall not be allowed to be utilized for payment of duty on excisable goods, whether cleared for home consumption or for export.
10.?The language of Rule 57H(5) of the Excise Rules and Rule 9(2) of the Cenvat Rules is identical, therefore, the decision also has to be similar.
11.?It would also be pertinent to mention here that the High Court of Kerala in Collector of Central Excise and Custom, Cochin v. Premier Tyres Ltd. - 2001 (130) E.L.T. 417 following the judgment of the Apex Court answered a similar question in favour of the assessee and against the Department.
12.?It would also be pertinent to mention that the judgment of the Tribunal in Ashok Iron and Steel Fabricators case has been upheld by the High Court of Rajasthan in Hindustan Zinc Ltd. v. Union of India, 2008 (223) E.L.T. 149. The High Court held as follows :-
It can be seen from yet another angle. In case inputs are received in factory and used in manufacture of end product. But the end product is destroyed by fire before stage of its removal from factory premise. In such circumstances, no excise duty becomes payable on end product. Yet Modvat credit availed on inputs used in destroyed goods is not to be recalled. This is also suggestive of the fact the relevant date for considering exemption from duty of the end product in or in relation to which inputs are used is the date of its receipt in factory and condition is its actual use in or in relation to manufacture of end product by the manufacturer. The chargeability to duty or non-chargeability due to exemption or notified nil rate is to be considered at the stage before goods are actually produced, but on receipt of inputs intended to be used in manufacture of such goods. That being so ultimate clearance of goods at nil rate due to contingency existing at the time of removal does not affect the entitlement that legally arises long before that date.
13.?We are in respectful agreement with the judgment of the Kerala and Rajasthan High Courts. Since the language of Rule 9(2) of the Cenvat Rules is identical to that of Rule 57H(5) of the Excise Rules, we feel that the interpretation given by the Apex Court has to apply in the present case also and, therefore, even though the final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it.
14.?In view of the above discussion, the question is answered in favour of the assessee and against the Revenue. The appeal is accordingly dismissed. No order as to costs.
8. Further, the issue has been examined by Honble High Court of Himachal Pradesh in the case of Ranbaxy Laboratories Ltd.wherein again the Honble High Court has observed as under:
9.?In the said decision after taking into consideration the relevant provisions i.e. Rule 57 of Modvat credit under Central Excise Rules, 1944 and Rule 9(2) of the Cenvat Rules, as interpreted by the Apex Court in Collector of Central Excise, Pune and Others v. Dai Ichi Karkaria Ltd. and Others, 1999 (7) SCC 448 = 1999 (112) E.L.T. 353 (S.C.) the Division Bench of this Court specifically held that even though final product may be exempt from payment of excise, the assessee cannot be asked to reverse the Modvat credit already taken by it. The substantial question of law was answered in favour of assessee as against the Revenue.
10.?Subsequently, the very same view stands reiterated by another Division Bench of this Court in Saboo Alloys Pvt. Ltd. (supra), wherein also the following substantial question of law was involved and assessees similar plea accepted :-
Whether a manufacturer is required to reverse the Cenvat Credit taken by him in respect of inputs which are proved to have been used in the manufacture of goods which are exempted from excise duty in view of the provisions of Rule 6(1) of Cenvat Credit Rules, 2004 which provide that no credit can be taken in respect of inputs which are used in the manufacture of exempted goods.
11.?In the impugned order, the Appellate Authority has dealt with the aforesaid decisions by simply making the following observations:-
The Himachal High Court in CCE, Chandigarh v. M/s United Vanaspati Limited reported in 2009-TIOL-723 HP-CX and in CCE., Chandigarh v. Saboo Alloys Private Limited, reported in 2010 (249) E.L.T. 519, merely followed the decision of the Rajasthan High Court in Hindustan Zinc Limited. In Purval and Associates (supra) the Tribunal merely followed the decision of Hindustan Zinc Limited and in P.A. precision Components, the decision in Purval and Associates was followed without considering all the points which are considered herein.
12.?We are of the considered view that the Appellate Authority has failed to appreciate the ratio of law laid down by this Court in its right perspective. The decisions have been brushed aside and dealt with in a cryptic and perfunctory manner. On this aspect we refrain from saying anything further. It is not that the earlier view taken by this Court merely based upon the decisions rendered by the High Court of Rajasthan [2008 (223) E.L.T. 149 (Raj.)]. In fact this Court, while deciding the aforesaid appeals, took into account not only the relevant provisions of law but also the decisions rendered by various High Courts as also the Apex Court in Excise, Pune and Others v. Dai-Ichi Karkaria Ltd. and Others, 1999 (112) E.L.T. 353 (S.C.) = (1999) 7 SCC 448.
9. As the issue has already been settled in favour of the appellants, therefore, we hold that at the time opting area based exemption of Notification No.50/2003-CE dated 10.6.2003, the appellants are not required to reversed the credit in their cenvat credit account lying unutilized.
10. With these observations, the impugned orders are set aside and the appeals are allowed with consequential relief, if any.
(dictated and pronounced in the open court)
(Devender Singh) (Ashok Jindal)
Member (Technical) Member (Judicial)
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Appeal No.E/933 & 1074/2007
Himachal Futuristic Communication vs CCE, Chandigarh