2013 (10) TMI 566 - AT - Central Excise

Calculation CENVAT credit reversed under Rule 6(3) and recovered from the customers The Department, therefore, was of the view that the assessable value for the purpose of payment of the amount under Rule 6(3) would also include the amount of 5% / 10% of the sale price being recovered by the appellant from the customers and the appellant would be liable to pay an amount @ 5% / 10% on the extra amount of 5% / 10% being recovered from the customers Held that - Difference of opinion - matter referred to larger bench - Whether the appeal has to be allowed on the point of limitation and penalty and the matter is required to be remanded to the Commissioner for re-quantification as held by my learned brother Member (T) or the impugned order is required to be set aside in its totality and the appeal is required to be fully allowed as held by learned Member (J).

Issues Involved:
1. Whether the amount of 5%/10% collected as "Cenvat Credit reversal" from customers should be treated as additional consideration and included in the assessable value.
2. Applicability of the extended period for issuing Show Cause Notices.
3. Justification for the imposition of penalties under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11AC.

Issue-wise Detailed Analysis:

1. Treatment of 5%/10% Amount as Additional Consideration:
The core issue was whether the amount of 5%/10% of the sale value of exempted goods, collected by the appellant from customers and paid to the government as "Cenvat Credit reversal," should be considered as additional consideration and included in the assessable value.

- Department's View: The Department argued that the amount paid under Rule 6(3) of the Cenvat Credit Rules, 2004, is essentially a reversal of Cenvat Credit on a presumptive basis for inputs used in manufacturing exempted final products. Since the amount collected from customers is not directly paid to the government but is recovered, it should be treated as additional consideration and part of the sale price. Consequently, the appellant should pay an amount @ 5%/10% on this additional consideration as well.

- Appellant's View: The appellant contended that the amount collected from customers was already paid to the government as required by Rule 6(3) and should not be treated as additional consideration. They relied on the Larger Bench judgment in the case of Unison Metals Ltd. vs. Commissioner of Central Excise, which held that the provisions of Section 11D are not applicable to amounts paid under Rule 57CC of the Central Excise Rules, 1944, and recovered from buyers.

- Tribunal's Decision: The Tribunal held that the amount payable under Rule 6(3) is a reversal of Cenvat Credit for inputs used in exempted final products. Therefore, if the same amount is recovered from customers, it should be treated as additional consideration and part of the sale price. However, the Tribunal noted that the demand should be limited to the normal limitation period as the facts were already known to the Department from previous Show Cause Notices.

2. Applicability of the Extended Period for Issuing Show Cause Notices:
The appellant argued that the demand for the period from April 2005 to February 2010 was time-barred because the Department was already aware of the facts from earlier Show Cause Notices issued on the same grounds.

- Tribunal's Decision: The Tribunal agreed with the appellant, stating that since the facts were already known to the Department, the extended period for issuing Show Cause Notices could not be invoked for subsequent periods. Therefore, the demand should be limited to the normal limitation period.

3. Justification for the Imposition of Penalties:
The Department had imposed penalties under Rule 15(2) of the Cenvat Credit Rules, 2004, read with Section 11AC, arguing that the appellant had suppressed relevant facts.

- Tribunal's Decision: The Tribunal found no justification for imposing equal amounts of penalties under Rule 15(2) and Section 11AC, as the dispute pertained to the interpretation of Cenvat Credit Rules. Moreover, the appellant is a Central Government Public Sector Undertaking, which further negated the justification for penalties.

Separate Judgment by Archana Wadhwa:
Judge Archana Wadhwa disagreed with the majority opinion. She held that the amount of 5%/10% collected by the appellant and paid to the government should not be treated as additional consideration or part of the assessable value. She relied on the Larger Bench decision in Unison Metals Ltd. and the Board's Circular No. 870/8/2008, which clarified that as long as the amount is paid to the government, it should not be treated as additional consideration. She also noted that the amount paid under Rule 6(3) is considered a tax, and recovery of this tax amount from customers should not be added to the assessable value.

Conclusion:
The majority decision remanded the matter to the Commissioner for re-quantification of the amount payable under Rule 6(3), limited to the normal limitation period, and set aside the penalties. However, Judge Archana Wadhwa's dissenting opinion held that the appeal should be allowed in its entirety, with no additional consideration or penalties.

← Previous Next →