2016 (6) TMI 866 - AT - Central Excise

Cenvat Credit - Scope of Rule 6 - pay an amount @8% (6% w.e.f. 07/07/2009) or to reversal proportionate credit - failure to exercise the option under Rule 6(3A) - Supply of tower and tower parts to M/s. RRB Energy Ltd. Which are used as parts of Wind Operated Electricity Generator (WOEG) - Exemption under Sl.No.84 of the Notification No.6/2006-CE dt. 01/03/2006 - Held that - The contention of the department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculated under the first option. I am afraid I cannot endorse this contention. The said rule does not say that on failure to intimate, the manufacturer / service provider would lose his choice to avail second option of reversing the proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing. - The Rule does not lay down any such restriction. The procedure and conditions laid in Rule 6(3A) is intended to make Rule 6(3) workable and not to take away the option available to the assessee. In any case, at no stretch of imagination can it be said that on failure to intimate the department, Rule 6(3)(i) would automatically come into application. The demand raised is not legal and proper - Decided in favor of assessee.

Summary

Issues:
1. Denial of exemption under Notification No.6/2006-CE
2. Demand raised for non-maintenance of separate accounts under Rule 6(3)(i) of CENVAT Credit Rules, 2004

Analysis:

Issue 1: Denial of exemption under Notification No.6/2006-CE
The case involved the appellants supplying tower parts to a company for Wind Operated Electricity Generators (WOEG) claiming exemption under Notification No.6/2006-CE. The department alleged that the supplied parts were not components of WOEG and issued a show-cause notice. The first order was dropped, but a subsequent notice claimed duty on goods cleared without maintaining separate accounts. The demand was contested, arguing the practical impossibility of separate accounts due to complex manufacturing. The appellants chose to reverse proportionate credit under Rule 6(3)(ii) but failed to inform the department in writing. The department contended that failure to intimate the choice mandated payment under Rule 6(3)(i). However, the Tribunal held that the procedural lapse did not nullify the second option, citing precedents and the intention of Rule 6(3A) as procedural, not punitive.

Issue 2: Demand raised for non-maintenance of separate accounts under Rule 6(3)(i) of CENVAT Credit Rules, 2004
The Revenue argued that failure to intimate the choice under Rule 6(3)(ii) necessitated payment under Rule 6(3)(i). The Tribunal disagreed, emphasizing that the rule did not automatically trigger the first option due to a procedural lapse. Citing precedents, including Mercedes Benz India (P) Ltd. Vs. CCE, Pune-I, the Tribunal deemed the demand unsustainable. The Revenue's plea for remand to quantify reversed credit was rejected, as the appellants' calculations were undisputed. The Tribunal set aside the impugned order, allowing the appeal with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellants, finding the demand unsustainable due to the procedural nature of the lapse in intimating the choice under Rule 6(3)(ii). The judgment highlighted the importance of procedural compliance while interpreting tax laws and upheld the appellants' right to choose the method of compliance under the CENVAT Credit Rules, 2004.