2015 (9) TMI 776 - HC - Central Excise

Reversal of cenvat credit - at proportionate rate or at 10%/5% as per Rule 6(3) - Non maintenance of separate inventory - Contravention the provisions of Rule 6(2) of the Cenvat Credit Rules, 2004 - Held that - Neither there is any allegation in the memorandum of appeal nor it has been argued on behalf of the appellant that the findings of fact recorded by the Tribunal, are perverse. The Tribunal being the last fact finding authority, its findings of fact cannot be interfered unless it is alleged and established that the findings are perverse. Thus, no substantial questions of law as framed by the appellant arise for consideration - So far as the findings of the Tribunal with regard to judicial discipline is concerned, we find that it is undisputed that the earlier Final Order 2012 (2) TMI 438 - CESTAT NEW DELHI as corrected by order, whereby the Tribunal remanded the matter to the present appellant with specific directions, was accepted by the appellant/ Central Excise Department and thus became final. Therefore, it was not open for the Commissioner of Central Excise, Kanpur to pass the order ignoring the remand direction and confirming the demand on the same grounds as taken in the first order in original which was set aside by the Tribunal. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not acceptable to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. - No merit in this appeal. No substantial question of law arises - Decided against Revenue.

Summary

Issues Involved:
1. Applicability of Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 beyond 01.04.2008.
2. Extension of benefits under Rule 6(3)(ii) & (iii) of the Cenvat Credit Rules, 2004 without exercising the option under Rule 6(3A)(a).
3. Tribunal's decision on imposing costs on the adjudicating authority.

Detailed Analysis:

1. Applicability of Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 beyond 01.04.2008:
The Tribunal held that the benefit under Section 73 of the Finance Act, 2010, which allows for the reversal of actual cenvat credit involved on inputs/input services used in the manufacture of exempted final products, is applicable for the period from April 2008 to March 2010. The Tribunal observed that the retrospective amendment made by Section 73 of the Finance Act, 2010, extends the applicability of Rule 6(3)(ii) beyond 01.04.2008. The Tribunal directed the Commissioner to calculate the amount to be reversed based on the proportionate use of inputs/input services in relation to exempted final products.

2. Extension of benefits under Rule 6(3)(ii) & (iii) of the Cenvat Credit Rules, 2004 without exercising the option under Rule 6(3A)(a):
The Tribunal found that the respondent had maintained separate accounts for inputs/input services used in the manufacture of dutiable and exempted final products. The Tribunal noted that the respondent did not avail of cenvat credit on inputs/input services used in the manufacture of exempted goods. The Tribunal emphasized that the Commissioner, in de novo proceedings, should determine the amount payable under Rule 6(3) based on the proportionate use of inputs/input services in the manufacture of exempted final products, as per the Tribunal's earlier order. The Tribunal also noted that the Commissioner ignored the verification reports confirming that the respondent had not taken cenvat credit on inputs/input services used in exempted products.

3. Tribunal's decision on imposing costs on the adjudicating authority:
The Tribunal criticized the Commissioner for disregarding its earlier directions and passing an order in contumacious disregard of the Tribunal's decision. The Tribunal noted that such irresponsible adjudication increases the cost of compliance for the assessee and burdens the Tribunal with unnecessary appeals. The Tribunal imposed a cost of Rs. 10,000 on the Commissioner for defying the Tribunal's directions and passing an order that should never have been passed. The Tribunal directed that the cost be paid to the Registry of the Tribunal within four weeks and informed the Chairman, Central Board of Excise & Customs.

Conclusion:
The High Court dismissed the appeal, affirming the Tribunal's decision. The High Court emphasized the importance of judicial discipline and the binding nature of appellate directions. The High Court noted that the Tribunal's findings of fact were not challenged as perverse and that the Tribunal's decision to impose costs on the Commissioner was justified due to the Commissioner's disregard for judicial directions. The appeal was dismissed, and no substantial question of law was found to arise from the case.