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2018 (9) TMI 1578 - AT - Central ExciseCENVAT credit - clearance of exempt product - Whether appellants were liable to pay the amount collected/charged on clearance of exempted product under Section 11 D of Central Excise Act, 1944? - Held that - From perusal of excise invoice, commercial invoice and customer ledger available in appeal paper book, it is found that amount reversed under Rule 6 has never been charged or collected from the customer. In the excise invoice it was shown separately to comply the provisions of Rule 6 of Cenvat Credit Rules, 2004. Further, there is no dispute that amount of ₹ 56161401/- has already been reversed by the appellants in their credit account. This issue stands settled by the decision of Larger Bench of this Tribunal in the case of Unison Metals Ltd. Vs CCE 2006 (10) TMI 171 - CESTAT, NEW DELHI , where it was held that as long as the amount of 8% or 10% is paid to the Government in terms of erstwhile rule 57CC of the Central Excise Rules, 1944 or rule 6 of the Cenvat Credit Rules, the provisions of section 11D shall not apply even if the amount is recovered from the buyers - the decision squarely applies to the present case and that demand confirmed under Section 11 D of Central Excise Act, 1944 is set aside. CENVAT Credit - Whether appellants were eligible to take Cenvat credit on molasses received in the distillery division after payment of Central Excise duty either from its sugar division or from some other factory? - Held that - There is no dispute that molasses received in distillery division had been utilized for manufacture of final products which were dutiable as well as exempted. In terms of Rule 3 of Cenvat Credit Rules, 2004, appellants were eligible for taking credit of Central Excise duty paid on molasses so received in distillery division - appellants are eligible for Cenvat credit of Central Excise duty paid on molasses received in the distillery division. Whether appellants were eligible to take Cenvat credit of molasses purchased from other sugar factories after payment of Central Excise duty received as distillery division? - Held that - Appellants are engaged in the manufacture of dutiable as well as exempted final products which were exempted as well as dutiable. In terms of Rule 3 of Cenvat Credit Rules, 2004, appellants were eligible for taking credit of Central Excise duty paid on other inputs/input services used in distillery division - appellants are also eligible for Cenvat credit of input services like Erection Commissioning Services, Goods Transport Services, Security Services etc. Whether appellants were eligible to avail Cenvat credit on other inputs/services used in distillery division for manufacture of exempted products i.e. rectified spirit/ENA? - Held that - Rectified spirit and/or ENA is sold out side by the appellants; it is also consumed captivity for manufacture of dutiable final product like Denatured spirit and Special Denatured Spirit; it is also consumed captively for manufacture of non excisable products like country liquor and Indian made foreign liquor - To the extent rectified spirit and/or ENA is capitively consumed for manufacture of non excisable final products and to the extent rectified spirit is sold out side, we hold that appellants were liable to reverse credit in terms of Rule 6 (3) of Cenvat Credit Rules, 2004. Whether appellants were liable for reversal of credit under Rule 6 (3) of Cenvat Credit Rules, 2004 at the rate of 10% or on proportionate basis on clearance of rectified spirit/ENA during March, 2002 to March, 2007? - Held that - Rule 6 (3) has been amended from time to time. For the period up to 20.02.2007, in case of products falling under Chapter Heading 22.04, assessees were required to reverse credit attributable to inputs and inputs services in or in relation to manufacture of such final products. In case of other final products assessees were required to pay an amount equal to 10% of the total price excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product charged by the manufacturer for sale of such goods at the time of clearance from the factory - w.e.f. 21.02.2007 in case of products falling under Chapter Heading 22072000, assessees were required to reverse credit attributable to input and inputs services in or in relation to manufacture of such final products. In case of other final products assessees were required to pay an amount equal to 10% of the total price excluding sales tax and other taxes, if any, paid on such goods, of the exempted final product cleared by the manufacturer for sale of such goods at the time of clearance from the factory. Thus, For the period 01.03.2002 to 27.02.2005, appellants were required to reverse credit on attributable basis - For the period 28.02.2005 to 20.02.2007, appellants were required to reverse the credit @ 10% of the total price of exempted final product - Again w.e.f. 21.02.2007, appellants were required to reverse credit on attributable basis. Adjudicating authority is directed to determine the amount reversible in terms of this order and the appellants shall be liable for payment of any amount found to have been short paid/reversed. We further direct that in case appellants have reversed more amount than the amount reversible in terms of this order, appellants shall be eligible for its refund as consequential relief. Appeal disposed off.
Issues Involved:
1. Liability to pay the amount collected/charged on clearance of exempted product under Section 11D of the Central Excise Act, 1944. 2. Eligibility to take Cenvat credit on in-house molasses manufactured in the sugar division and transferred to the distillery division after payment of Central Excise duty. 3. Eligibility to take Cenvat credit of molasses purchased from other sugar factories after payment of Central Excise duty received in the distillery division. 4. Eligibility to avail Cenvat credit on other inputs/services used in the distillery division for the manufacture of exempted products (rectified spirit/ENA). 5. Liability for reversal of credit under Rule 6(3) of Cenvat Credit Rules, 2004, either at the rate of 10% or on a proportionate basis on clearance of rectified spirit/ENA during March 2002 to March 2007. Detailed Analysis: 1. Liability under Section 11D of the Central Excise Act, 1944: The tribunal examined whether the amount reversed by the appellants was collected from customers and represented as central excise duty. The appellants argued that the amount reversed was not charged to customers and was only shown in the invoices to comply with Rule 6 of the Cenvat Credit Rules, 2004. The tribunal referred to the Larger Bench decision in Unison Metals Ltd. and a board circular dated 16.05.2008, concluding that the provisions of Section 11D do not apply if the amount is already paid to the government. Consequently, the demand of ?5,61,61,401/- confirmed under Section 11D was set aside. 2. Eligibility to take Cenvat credit on in-house molasses: The tribunal noted that the molasses received in the distillery division were used for manufacturing both dutiable and exempted final products. Referring to a previous decision in the appellants' own case, the tribunal held that the appellants were eligible to take Cenvat credit of the Central Excise duty paid on molasses received in the distillery division. 3. Eligibility to take Cenvat credit of molasses purchased from other sugar factories: Similar to the in-house molasses issue, the tribunal confirmed that the appellants were eligible to take Cenvat credit on molasses purchased from other sugar factories, as the molasses were used in the manufacture of final products in the distillery division. 4. Eligibility to avail Cenvat credit on other inputs/services: The tribunal held that the appellants were eligible to take Cenvat credit on other inputs like sulphuric acid, boiler chemicals, lubricants, and input services like erection commissioning services, goods transport services, etc., used in the distillery division for manufacturing both dutiable and exempted final products. 5. Liability for reversal of credit under Rule 6(3) of Cenvat Credit Rules, 2004: The tribunal analyzed the applicability of Rule 6(3) for the period from March 2002 to March 2007. It was determined that: - For the period 01.03.2002 to 27.02.2005, appellants were required to reverse credit on an attributable basis. - For the period 28.02.2005 to 20.02.2007, appellants were required to reverse credit at 10% of the total price of the exempted final product. - From 21.02.2007 onwards, appellants were again required to reverse credit on an attributable basis. The tribunal directed the adjudicating authority to determine the amount reversible in terms of this order and allowed for the possibility of a refund if the appellants had reversed more than required. Penalties: The tribunal set aside all penalties imposed under Section 11AC and Rule 25 of the Central Excise Rules, 2002, stating that the dispute was related to the interpretation of Rule 6 of the Cenvat Credit Rules without any contumacious conduct or intentional evasion of duty. Conclusion: The appeal was disposed of in the above terms, providing clarity on the eligibility for Cenvat credit and the reversal of credit under Rule 6(3) of the Cenvat Credit Rules, 2004.
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