9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (10) TMI 2 - AT - Central ExciseInadmissible CENVAT credit - input services used for the manufacture of dutiable goods as well as for the provision of exempted service of trading - non-maintenance of separate accounts for the receipts and use of input services in or in relation to the manufacture of dutiable products and exempted services as required under the provisions of Rule 6(2) of the CCR, 2004 - HELD THAT - From the facts of the case, it is seen that the appellants are paying service tax on royalty charges to their overseas principals in respect of the bottle closures manufactured domestically in their factory as well as in respect of the bottle closures imported and sold as it is. In respect of such royalty payment, treating the same as services provided to the appellants by the overseas principals in non-taxable territory, the appellants had discharged the service tax liability as recipient of service. The department had interpreted that since royalty charges are paid in respect of both domestically manufactured and imported bottle closures, these are common input services and therefore the appellants are required to maintain separate account for common input services utilised in dutiable as well as exempt/non-taxable trading service. Further, they are required to pay an amount equal to prescribed percentage of the value of exempted traded goods, considering it as exempted services as defined under Rule 2(e) of the CCR, 2004. It is on record that the appellants have already calculated the value of trading of bottle closures during the period June, 2016 to December, 2016 and had duly discharged the amount to be reversed as per Rule 6(3) of the CCR, 2004 including the interest and 15% penalty, before issuance of the SCN. However, neither the original order nor the impugned order have gone into the details of such facts, to either examine, scrutinise the fact that such payment is as per CCR, 2004 or to record the reasons as to why the same is not acceptable. Thus, the difference between the above figures being Rs. 3,86,170/- and 10% of the cost of the traded goods has been worked out as Rs.71,55,278/-, and the higher of the same has been taken into account for determination of the prescribed 7% percentage for the purpose of determining the amount required to be paid under Rule 6(3) of the CCR of 2004 as Rs.5,00,869/-. The appellants have duly followed the procedure and conditions prescribed in complying with the obligations under CENVAT Credit Rules, 2004, and had also complied with for payment of CENVAT credit when pointed out by the audit wing of the department along with interest and penalty - the value of trading of goods taken as a basis in the SCN at Rs.7,19,38,951/- in paragraph 10 of the original order and the consequent amount of CENVAT to be paid under Rule 6(3)(i) of the CCR of 2004 in that paragraph and the same amount dealt in paragraph 10.1 of the impugned order, is not disputed by the appellants. From careful reading of the legal provisions under clause (c) of Explanation I to Rule 6(3) of the CCR, 2004 for the purpose of determining the value in case of trading of goods and to work out the CENVAT amount to be paid, it transpires that higher of the two amounts indicated therein has to be taken as the basis for arriving at the correct amount to be paid. It is further found that the amount already calculated by the appellants towards such payment also needs to be taken into account, while determining the balance amount required to be paid towards payment of CENVAT amount under Rule 6(3) of the CCR of 2004. However, the original authority had not recorded the basis on which he had dealt with the demand as proposed in the SCN and how he had taken into account the various figures as provided by the appellants - the learned Commissioner (Appeals) had modified the order of the original authority for redetermination of the correct amount of CENVAT amount to be paid by the appellants, after the exercise of the option by the appellants under Rule 6(3AA) of the CCR, 2004. The Tribunal in the case of BHEL-GE Gas Turbine Services Pvt. Ltd. 2020 (2) TMI 1367 - CESTAT HYDERABAD had held that the assessee-appellant having paid the CENVAT credit amount towards trading of goods, has to be construed as no CENVAT credit has been taken and accordingly dropped the demand. There are no reason for interfering with that part of the impugned order at paragraphs 14(i) to 14(iii) passed by the learned Commissioner (Appeals) as it had duly taken into account the amount of CENVAT paid by the appellants along with interest and penalty, and had directed the original authority for redetermination of the actual amount of CENVAT to be paid under Rule 6(3) of the CCR, 2004 and interest thereon, after taking into account the option chosen by the appellants in terms of Rule 6(3AA) ibid, for determination of the amount payable by the appellants. However, the portion of the impugned order at paragraph 14(iv) therein, imposing penalty on the appellants is set aside. Appeal allowed in part.
Issues Involved:
1. Whether the demand of CENVAT credit towards payment of prescribed amount in respect of exempted services, arising out of trading of goods, for the disputed period, which was also paid by appellants later along with interest and penalty, is proper and in compliance with legal provisions under Rule 6(3) of the CCR, 2004 read with Section 11A of the Central Excise Act, 1944. 2. Whether the amount is required to be redetermined as held in the impugned order. Issue-Wise Detailed Analysis: 1. Demand of CENVAT Credit and Compliance with Legal Provisions: The appellants, engaged in the manufacture and clearance of dutiable goods, were observed by the department to have trading sales of imported bottle closures valued at Rs. 7,19,38,951 during the FY 2016-17. The department interpreted this as an exempted service under Section 66D(e) of the Finance Act, 1994. The appellants included the traded value in the royalty value payable to overseas principals and availed credit of service tax paid on such royalty charges. The department concluded that the appellants failed to maintain separate records for input services used in the manufacture of dutiable goods and provision of exempted services, thus requiring them to reverse a prescribed proportion of the value of exempted services under Rule 6 of the CCR, 2004. The original authority confirmed the demands proposed in the SCN, citing the appellants' failure to maintain separate accounts and disclose the amount of CENVAT credit availed. The authority held that the appellants were guilty of suppression of facts, invoking Section 11A(4) of the Central Excise Act, 1944 read with Rule 14 of the CCR for demand and recovery of CENVAT amount. The quantification of the amount determined as payable involved calculating the maximum of either the difference between the sale price and cost price of the traded goods or 10% of the cost of the traded goods. The original authority found that the appellants were required to reverse 7% of Rs. 71,55,278, amounting to Rs. 5,00,869. Upon appeal, the Commissioner (Appeals) upheld the order of the original authority but modified it, directing the appellants to submit a calculation sheet for the amount to be paid in terms of Rule 6(3A) of the CCR, 2004 for verification and redetermination of the amount to be reversed. The Tribunal found that the appellants had duly followed the procedure and conditions prescribed under the CENVAT Credit Rules, 2004, and had complied with the payment of CENVAT credit along with interest and penalty when pointed out by the audit wing. The Tribunal noted discrepancies in the figures used by the authorities below and found that the original order did not record the basis for dealing with the demand as proposed in the SCN. The Tribunal upheld the decision of the Commissioner (Appeals) to redetermine the correct amount of CENVAT to be paid under Rule 6(3) of the CCR, 2004. 2. Redetermination of the Amount: The appellants argued that they had reversed the proportionate CENVAT credit of Rs. 2,24,435 and paid interest and penalty before the issuance of the SCN. They contended that trading activity should not be considered a service and that there was no element of suppression on their part. The Tribunal found that the dispute lay in determining the correct amount to be paid under Rule 6(3) of the CCR, 2004. The Tribunal noted that the SCN mentioned the disputed period as 2016-2017, while the worksheet provided by the appellants covered only seven months. The Tribunal emphasized the need to take into account the higher of the two amounts indicated under clause (c) of Explanation I to Rule 6(3) of the CCR, 2004 for determining the value in case of trading of goods. The Tribunal upheld the impugned order directing the original authority to redetermine the actual amount of CENVAT to be paid under Rule 6(3) of the CCR, 2004, after considering the option chosen by the appellants under Rule 6(3AA). The Tribunal also found support in the decisions of the Tribunal in Bisazza India Pvt. Ltd. and BHEL-GE Gas Turbine Services Pvt. Ltd., which held that the discretion of choosing the method of compliance with Rule 6 lies with the assessee and that reversal of CENVAT credit amount towards trading of goods should be construed as no CENVAT credit taken. The Tribunal set aside the portion of the impugned order imposing a penalty on the appellants, finding no basis for such imposition under Section 11AC of the Central Excise Act, 1944. Conclusion: The Tribunal modified the impugned order to the extent that it directed the original authority to redetermine the actual amount of CENVAT to be paid under Rule 6(3) of the CCR, 2004, after considering the option chosen by the appellants. The portion of the impugned order imposing a penalty on the appellants was set aside, and the appeal filed by the appellants was partly allowed.
|
