2019 (8) TMI 1686 - AT - Central Excise

CENVAT Credit - manufacture of both dutiable and exempted goods - non-maintenance of separate records - rule 6(3)(i) of the Credit Rules - Revenue entertained a view that in as much as during the relevant period from 18/03/2012 to 07/05/2012, the Notification No. 6/2006-CE as appearing in Rule 6(6)(vii) was not replaced with the new Notification No. 12/2012 dated 17/03/2012, the said Rule would not be applicable and the Appellant would be required to pay six per cent of the value of exempted goods cleared to the Mega Power Plant - HELD THAT - Admittedly, the Notification No. 6/2006 continued to appear in Sub-Rule 6(6)(vii), even though the same was not in force during the relevant period and the said mistake was rectified on 08/05/2012, when Notification No. 25/2012, was issued. The subsequent exemption Notification No. 12/2012 was introduced in the said rule 6(6)(vii) thereafter. As is seen from the clarification issued by the Board, the Ministry of Finance vide their letter F. No. 267/49/2013-CX.8 dated 30th June, 2015 caused the unintended mistake, to be rectified later. The Supreme Court in the case of W.P.I.L. LTD V/s Commissioner of Central Excise, Meerut, U.P. 2005 (2) TMI 137 - SUPREME COURT dealt with an identical situation and observed that when it was the consistent policy of the Government to grant exemption to the parts used in the manufacture of power pumps, any gap between the withdrawal of such exemption and subsequent introduction of such exemption has to be treated as clarifactory in nature and has to be construed retrospectively. In the present case, it is not even the case of re-introduction of exemption notification. Exemption continued in as much as with the rescinding of Notification No. 6/2005, the subsequent Notification 12/2012 was immediately introduced. It is only in the provisions of Rule 6(6)(vii) of the Credit Rules, which are to the effect that there would be no requirement of reversal of any amount in case of the goods cleared under the exemption to Mega Power Project, Notification No. 6/2006 was not replaced with Notification No. 12/2012. This inadvertent mistake was clarified by the Board vide the clarification reproduced hereinabove. Admittedly, the goods continued to be cleared under exemption to the Mega Power Projects - it is the Notification No. 12/2012, that has to be read in the provisions Rule 6(6)(vii) of the Cenvat Credit Rules with retrospective effect. In such a scenario there would be no requirement of reversal of Cenvat Credit, in terms of the provisions Rule 6(3). Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 6 of the Cenvat Credit Rules, 2004 regarding payment of duty on exempted goods.
2. Applicability of Notification No. 6/2006-CE and Notification No. 12/2012-CE in relation to the exemption of goods supplied to Mega Power Project.
3. Rectification of unintended technical lapses in the legal provisions.
4. Consideration of consistent government policy in granting exemptions.

Analysis:

Issue 1: Interpretation of Rule 6 of the Cenvat Credit Rules, 2004
The case revolved around the demand of ?21,85,773 on the appellant under Rule 14 of the Credit Rules along with penalties and interest for the period between 17.03.2012 to 07.05.2012. The appellant failed to maintain separate records for dutiable and exempted goods as required by Rule 6(3) of the Credit Rules. Consequently, the demand was upheld by the Additional Commissioner, leading to the appeal before the tribunal.

Issue 2: Applicability of Notification No. 6/2006-CE and Notification No. 12/2012-CE
The appellant claimed exemption under Notification No. 6/2006-CE for goods supplied to the Mega Power Project during the relevant period. However, the revenue authorities contended that the appellant should have paid 6% of the value of the exempted goods as per Rule 6(3)(i) of the Credit Rules since the old notification was replaced by Notification No. 12/2012. The tribunal noted the unintended technical lapse in the provisions and the subsequent rectification by the Ministry of Finance to extend benefits under the new notification even for the period before its formal introduction.

Issue 3: Rectification of unintended technical lapses
The Central Board of Excise and Customs clarified the unintended technical lapse in the reference to the outdated Notification No. 6/2006-CE in Rule 6(6)(vii) during the relevant period. The Board acknowledged the mistake and extended the benefit of the new notification retrospectively, aligning with the consistent policy of granting exemptions.

Issue 4: Consideration of consistent government policy
The tribunal, relying on Supreme Court precedents, emphasized that inadvertent errors in exemption notifications should be rectified retrospectively to uphold the consistent policy of the government. In this case, the tribunal agreed that the rectification of the mistake regarding the notification in Rule 6(6)(vii) should be applied with retrospective effect, leading to the setting aside of the impugned order and granting relief to the appellant.

In conclusion, the tribunal allowed the appeal, considering the rectification of the unintended technical lapses and the consistent government policy in granting exemptions, leading to the reversal of the demand and penalties imposed on the appellant.