2023 (1) TMI 450 - AT - Central Excise

CENVAT Credit - input services - pre-shipment charges (received after the Let export order by Customs) and terminal handling charges in respect of export of goods - right to choose an option to reverse the amount under Rule 6(3) of Cenvat Credit Rules when they have not specifically exercised any such option before such transaction - invocation of second proviso to Section 11AC (1) of Central Excise Act 1944 - disputed period April 2016 to June 2017 - CBEC Circular No. 999/6/2015-CX dated 28.02.2015 - HELD THAT - It is seen from the above that Circular presumes that after the Let export order there is no activity undertaken by the exporter and therefore no credit is available. On this ground Cenvat credit on pre-shipment charges has been denied - In the instant case the appellants continued possession even after Let Export order as is apparent from the fact that they managed Inspection and handling of goods. In view of above the Circular is not applicable. The appeal on this count is allowed. Whether the Adjudicating Authority has discretion to choose which method of compliance with the requirement of Rule 6 of Cenvat Credit Rules 2004 is to be followed by the assessee or not? - HELD THAT - There is no authority in law which gives Revenue to exercise such discretion. There is plethora of decisions which says that discretion of choosing method of compliance with Rule 6 is exclusively with the assessee. In these circumstances the impugned order on this count cannot be sustained. Therefore the impugned order remanding the matter to the lower authority to quantify the amount to be reversed is modified to the extent that reversal will be done as per the choice of method of compliance of the appellant in terms of Rule 6 of Cenvat Credit Rules 2004. As the issue regarding invocation of second proviso to Section 11AC (1) of Central Excise Act 1944 has not been pressed the appeal on that count is not allowed. Appeal disposed off.

Summary

Issues:
1. Denial of credit on input services of pre-shipment charges and terminal handling charges for export of goods.
2. Right of the appellant to choose an option to reverse the amount under Rule 6(3) of Cenvat Credit Rules.
3. Invocation of the second proviso to Section 11AC(1) of the Central Excise Act, 1944 for the disputed period.

Analysis:

Issue 1: Denial of Credit on Input Services
The appellant filed an appeal against the denial of credit on input services of pre-shipment charges and terminal handling charges for the export of goods. The appellant argued that the denial was based on a circular that presumed no further activity was required after the Let export order, which conflicted with the actual activities undertaken by the exporter post-order. The circular was found inapplicable as the appellant continued to possess the goods even after the Let Export order, managing inspections and handling. The tribunal allowed the appeal on this ground, recognizing the appellant's ongoing involvement post-order.

Issue 2: Right to Choose Reversal Option under Rule 6(3)
The second issue revolved around the appellant's right to choose the method of compliance under Rule 6(3) of the Cenvat Credit Rules for reversing the credit related to trading activities. The first Appellate Authority had denied the appellant's chosen reversal option, citing the authority's discretion post-transaction. However, the tribunal found no legal basis for the Revenue to exercise such discretion, emphasizing that the choice of compliance method lies exclusively with the assessee. The tribunal modified the impugned order, allowing the appellant to reverse the amount as per their chosen method of compliance under Rule 6.

Issue 3: Invocation of Second Proviso to Section 11AC(1)
The third issue, regarding the invocation of the second proviso to Section 11AC(1) of the Central Excise Act, 1944 for the disputed period, was not pressed by the appellant's counsel. Consequently, the appeal on this count was not allowed by the tribunal.

In conclusion, the tribunal allowed the appeal on the denial of credit for input services post Let export order and modified the impugned order to grant the appellant the right to choose the method of compliance for reversing the credit. The third issue was not pursued and, therefore, not allowed. The appeal was disposed of accordingly.