2015 (2) TMI 924 - AT - Central Excise

Reversal of Cenvat credit in case of Common Cenvat credit - Manufacturing of dutiable as well as exempted articles - Retrospective amendment in Rule 6(3) of the Cenvat Credit Rules, 2004 - Commissioner in de novo proceedings could not go into question already decided by tribunal - Safeguarding the interests of the Revenue does not mean that a duty demand must be confirmed ignoring the facts on record, pleas made by the assessee and the judgments of the Tribunal and the courts - Penalty on adjudicating authority / Commissioner for passing irresponsible adjudication orders. Held that - We are of the view that this order of the Commissioner is not only without application of mind whatsoever but is also in contumacious disregard of the decision of the Tribunal. - in the de novo adjudication proceedings, which will be the third round of adjudication by the Commissioner, the Commissioner must requantify the cenvat credit to be reversed on proportionate basis for the period from 1.4.2008 to August, 2009 strictly as per the Tribunal s order i.e under Rule 6(3) (ii) read with the formula prescribed in Rule (3A) and in this regard, the Commissioner shall consider the Appellant s plea that they, during this period, have not taken the credit in proportion to the inputs/input services used in on in relation to manufacture of exempted final products and also the reports of Asstt. Commissioner of Central Excise, Agra to Asstt. Commissioner (Adjudication) on this issue. In view of the Tribunal s final order dated 27.12.2012, the Commissioner cannot once again go into the question of applicability of the provisions of Rule 6(3)(ii).Since the Tribunal had set aside the penalty, in de novo proceedings, the Commissioner cannot decide to impose the penalty again. - Decided in favour of assessee. Hon ble Delhi High Court in case of Rahul Enterprises 1998 (12) TMI 577 - DELHI HIGH COURT has held that Commissioner of Sales Tax, as quasi judicial authority, can impose adjournment cost, as while awarding costs acts as a deterrent to the frequent requests for adjournment, it also compensates the other party for inconvenience caused by adjournment. In our view this principle, though in the context of frequent requests for adjournment, will apply in a case where the commissioner defying the Tribunal s directing and ignoring the provisions of law passes an order which should never have been passed and thereby forcing the assessee to file appeal before the Tribunal. Accordingly, a cost of ₹ 10,000/- (Rupees ten thousand only) is imposed on the Respondent Commissioner which is to be paid by the Commissioner who has adjudicated this matter.

Issues Involved:
1. Use of common Cenvat credit availed inputs and input services for manufacturing dutiable and exempted goods.
2. Non-maintenance of separate accounts and inventory of inputs and input services.
3. Application of Rule 6(3) of the Cenvat Credit Rules, 2004.
4. Retrospective amendment by Finance Act, 2010.
5. Imposition of penalty under Rule 15 of the Cenvat Credit Rules, 2004.
6. Tribunal's directions for re-quantification of demand.
7. Commissioner's compliance with Tribunal's directions.
8. Introduction of additional evidence.
9. Imposition of costs on the Commissioner for non-compliance.

Detailed Analysis:

1. Use of Common Cenvat Credit Availed Inputs and Input Services:
The appellant engaged in the manufacture of both dutiable and exempted glassware, availed Cenvat credit on inputs and input services used for both categories. The department contended that due to non-maintenance of separate accounts, the appellant was liable to pay an amount equal to 5%/10% of the sale value of exempted goods under Rule 6(3) of the Cenvat Credit Rules, 2004.

2. Non-Maintenance of Separate Accounts and Inventory:
The appellant did not maintain separate accounts and inventory for inputs and input services used in manufacturing dutiable and exempted goods. Consequently, show cause notices were issued for recovery of amounts based on the sale value of exempted goods.

3. Application of Rule 6(3) of the Cenvat Credit Rules, 2004:
Rule 6(3) was amended on 1.3.2008 to allow manufacturers using common inputs/input services to reverse the Cenvat credit attributable to the manufacture of exempted goods. By the Finance Act, 2010, a retrospective amendment was made effective from 10.09.2004, allowing manufacturers to pay an amount equal to the Cenvat credit attributable to inputs used for exempted goods.

4. Retrospective Amendment by Finance Act, 2010:
The Tribunal observed that the retrospective amendment to Rule 6(3) by the Finance Act, 2010, applied to the disputed period (April 2008 to March 2010). The Tribunal remanded the matter to the Commissioner to re-quantify the demand based on the actual Cenvat credit attributable to inputs used for exempted goods.

5. Imposition of Penalty under Rule 15 of the Cenvat Credit Rules, 2004:
The Commissioner initially imposed penalties equal to the confirmed demands. However, the Tribunal set aside the penalties, noting that the matter involved interpretation of law, and penalties were not warranted.

6. Tribunal's Directions for Re-Quantification of Demand:
The Tribunal directed the Commissioner to re-quantify the demand, considering the retrospective amendment and the appellant's readiness to reverse the actual Cenvat credit attributable to inputs used for exempted goods. The Tribunal emphasized the need for proper reasoning and an opportunity for the appellant to be heard.

7. Commissioner's Compliance with Tribunal's Directions:
In the de novo proceedings, the Commissioner confirmed the demand based on 5%/10% of the sale value of exempted goods, disregarding the Tribunal's directions to re-quantify the demand based on actual Cenvat credit. The Commissioner also re-imposed penalties, contrary to the Tribunal's clear directions.

8. Introduction of Additional Evidence:
The appellant introduced additional evidence obtained under the Right to Information Act, showing that they had not taken Cenvat credit for inputs used in exempted goods. This evidence was allowed by the Tribunal and was crucial for the re-quantification of demand.

9. Imposition of Costs on the Commissioner for Non-Compliance:
The Tribunal noted the Commissioner's disregard for its directions and imposed a cost of Rs. 10,000 on the Commissioner for irresponsible adjudication. The Tribunal emphasized that safeguarding revenue interests should not ignore facts, pleas, and judicial directions.

Conclusion:
The Tribunal set aside the Commissioner's order and remanded the matter for de novo adjudication, directing the Commissioner to re-quantify the Cenvat credit to be reversed based on the actual use of inputs for exempted goods, as per the Tribunal's previous orders. The Tribunal also reiterated that penalties should not be imposed, and imposed a cost on the Commissioner for non-compliance with judicial directions.

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