2015 (11) TMI 465 - AT - Central Excise

Reversal of CENVAT Credit - determination of price of exempted goods under Rule 6 of CCR - For the purpose of reversal of 10% whether the basic contract price should be taken or price plus 10% reversal collected should be taken - Held that - From the contract documents that there is specific price fixed for sale of the goods and in that price there is no addition of this 10% in the form of the price. There is clause in the purchase order that against all the reversal of 10% customer shall pay the same amount to the appellant. In view of this fact contract price is the price and the same should be taken for calculation of 10% reversal required under 6(3)(b). As regard the 10% reversal made by the appellant and even though the same was collected from the customer the same was not retained by the appellant as the same was debited in their Cenvat credit account, therefore in this fact, it could not be said that 10 % reversal is part and parcel of the price of the goods. - in Rule 6(3) of CCR, 2004, prior to 1/4/2008 the 10% reversal is required to made on price of the goods and subsequent to 1/4/2008 it was amended and according to which 10% reversal was to be made on the value of the exempted goods. It was also clarified that value which is determined as per Section 4 or 4(A) of Central Excise Act, 1944, read with Rule made under. Prior to 1/4/2008 the price of which 10% reversal was to be made had no relevance to the Section 4 or 4(A) and it is also fact that term price mentioned in the Rule 6(3)(b) it was not defined in the Cenvat Credit Rules. In this position, I am of the view that price is to be taken as provided in the contract and as per contract; price does not include 10% reversal and collection thereof. Therefore 10% reversal made by the appellant on basic contract price is correct and legal. - Decided in favour of asssessee.

Summary

Issues:
1. Interpretation of Rule 6(3)(b) of CCR, 2004 regarding the reversal of 10% on exempted goods.
2. Whether the price for the purpose of reversal should include the 10% reversal amount collected from the customer.
3. Application of the judgment in the case of Unison Metals Ltd. to the present case.
4. Consideration of limitation period under Section 11A for demand of payment.

Analysis:

Issue 1: Interpretation of Rule 6(3)(b) of CCR, 2004
The appellant cleared goods at NIL rate of duty under Notification No. 10/97-CE but availed Cenvat credit for input used in manufacturing both dutiable and exempted products. The dispute arose regarding the reversal of 10% under Rule 6(3)(b). The appellant contended that the price for reversal should be based on the basic contract price without including the 10% reversal amount collected from the customer. The Tribunal analyzed the relevant provisions and held that prior to 1/4/2008, the 10% reversal was based on the "price" of goods, not inclusive of the 10%. Therefore, the contract price without the 10% reversal should be considered for calculation.

Issue 2: Inclusion of 10% reversal amount in price
The Revenue argued that the 10% reversal amount collected from the customer should be considered part of the price of exempted goods. However, the Tribunal found that the appellant debited the 10% reversal amount in their Cenvat credit account and did not retain it, indicating it was not part of the price. The Tribunal referred to the specific contract terms where the customer was to pay the reversal amount separately, supporting the view that the contract price did not include the 10% reversal.

Issue 3: Application of Unison Metals Ltd. judgment
The appellant relied on the Unison Metals Ltd. case, arguing that the facts were identical and the demand was not sustainable. The Tribunal agreed, stating that the judgment supported the appellant's case as it dealt with similar facts of reversal and collection of 10% from customers. The Tribunal emphasized that the larger bench judgment did not dispute the price of exempted goods for the reversal under Rule 6(3)(b).

Issue 4: Limitation under Section 11A
The appellant contended that the demand was beyond the normal one-year period and not supported by allegations of suppression or collusion. The Tribunal did not delve into the limitation issue as it decided the matter on merit. However, it noted that the appellant had disclosed all relevant information to the department, indicating no suppression of facts and rendering the demand time-barred.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief in accordance with the law. The decision clarified the interpretation of Rule 6(3)(b) and upheld the appellant's position regarding the calculation of the 10% reversal on exempted goods based on the basic contract price.