2017 (5) TMI 603 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(3)(b) of the CCR, 2004 - whether reversal of 10% of the price of the exempted product can be considered as any other taxes ? - Held that - applying broadly the proposal of the taxation, cost of the exempted goods needs to be considered as a whole and claim of reduction for 10% of credit towards consumption of the common inputs cannot be upheld as the price of exempted goods is not determined as per provisions of law - the reversal of 10% of the price of the exempted good is not for maintaining separate account of inputs used in the manufacture of exempted and is an option extended and exercised, cannot be held as compulsory exaction of money for the purpose of public. Payment of an amount at the rate of 8% or 10% u/r 6(3)(b) of the CCR, 2004 is not a duty, not a tax and hence cannot be deducted from the price of the exempted goods cleared for by consuming cenvated inputs - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
Interpretation of provisions of Rule 6(3)(b) of the Cenvat Credit Rules, 2004 regarding whether the 10% reversal amount on exempted goods is to be considered as "other tax" and deducted from the assessable value.

Analysis:

Issue 1: Interpretation of Rule 6(3)(b) provisions
The Larger Bench was constituted to resolve the question of law regarding the treatment of the 10% reversal amount under Rule 6(3)(b) of the Cenvat Credit Rules, 2004. The appellant argued that the 10% amount is equivalent to CENVAT credit paid on inputs and should be considered as a tax or exaction of amount. They relied on case law to support their argument that such charges are in the nature of tax and should be allowed as a deduction. On the other hand, the respondent contended that the 10% reversal amount is not a tax or levy but an exercise of an amount as per the provisions of Rule 6(3)(b).

Issue 2: Nature of the 10% reversal amount
The Tribunal analyzed the provisions of Rule 6(3)(b) and the arguments presented by both sides. It was observed that the rule does not define "any other taxes," and the reversal of 10% is not considered a tax but an amount for consuming cenvated inputs in the manufacturing of exempted goods. The Tribunal noted that the appellant's attempt to equate the 10% reversal with other taxes is not in line with the law, as the assessable value is defined under the Central Excise Act. The Tribunal concluded that the 10% reversal amount is not a duty or tax and cannot be deducted from the price of exempted goods.

Final Decision:
The Tribunal held that the 8% or 10% payment under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 is not a duty or tax and therefore cannot be deducted from the price of exempted goods. The Tribunal clarified that the reversal amount is an option extended and exercised by the assessee, not a compulsory exaction of money for public purposes. The reference was answered accordingly, directing the matter to be disposed of by the regular Bench.

This judgment clarifies the interpretation of Rule 6(3)(b) provisions and distinguishes the 10% reversal amount from taxes, emphasizing that it is not a compulsory levy but an option exercised by the assessee.