2018 (11) TMI 907 - AT - Central Excise

Demand u/s 11D - collection of amount - reversal of cenvat credit under Rule 6 - Supply of pipes to water supply projects - N/N. 6/2002 dated 01.03.2002 - case of Revenue is that Since the appellant also supplied the pipes without availing the benefit of the notification as above and since cenvat credit was availed on inputs, they were required to pay an amount @ 8% of the value of the exempted goods, in terms of Rule 6(3) of the Cenvat Credit Rules, 2004. Held that - The Tribunal in the case of Mayfair Polymer Pvt. Ltd. 2007 (9) TMI 519 - CESTAT, AHMEDABAD had occasion to examine a similar situation, where it was held that no evidence has been produced to indicate that they have shown an amount of duty more than the what they have paid to department in such assessment documents and collected such higher amounts and hence no case is made out for seeking recovery under Section 11D. In the present case, it is not in dispute that the appellant have not indicated in their invoices the amount of 8% separately as excise duty. Hence, in the line with the decision of the Tribunal, the demand cannot be sustained. The reference to Section 11D as it stood at the relevant time also makes it clear that the Section will have no application to exempted goods. Section 11D was made applicable to goods which are wholly exempted or chargeable to the Nil rate of duty only after its amendment w.e.f. 10.05.2008. This fact has also been circulated by CBEC at the time of amendment vide their instructions dated 29.02.2008. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004 regarding payment of 8% on exempted goods.
2. Applicability of Section 11D of the Central Excise Act, 1944 to recovery of amounts in the guise of central excise duty.
3. Whether recovery of 8% amount from customers constitutes excise duty.
4. Compliance with invoicing requirements for excise duty collection.

Analysis:
1. The appeal concerned the appellant, a manufacturer of Ductile Iron Pipes and Cast Iron Pipes, availing exemption under Notification No.6/2002 for supplying pipes to water supply projects. The appellant faced a demand for central excise duty under Section 11D for recovering 8% amounts from customers. The appellant argued that the recovered amounts were merged with contract values, not shown separately in invoices as excise duty. The Tribunal noted the appellant's separate accounts for dutiable and exempted goods, and the recovery method via contract renegotiation.

2. The Tribunal analyzed the applicability of Section 11D to the recovery practice. The adjudicating authority ordered payment under Section 11D, considering the recovered amounts as central excise duty. However, the Tribunal referenced precedents like Mayfair Polymer Pvt. Ltd. where recovery without separate invoicing for excise duty was not upheld. The Tribunal highlighted the necessity of proper invoicing for excise duty collection, as per Section 12A of the Central Excise Act, to justify recovery under Section 11D.

3. The Tribunal emphasized that the absence of separate excise duty indication in invoices rendered the demand unsustainable. It reiterated that recovery without proper invoicing does not align with excise duty collection requirements. The Tribunal also clarified that Section 11D, as amended in 2008, applies to wholly exempted or nil-rated goods, not relevant to the appellant's case. Citing CBEC instructions, the Tribunal concluded that recovery without proper invoicing cannot be considered excise duty collection.

4. Ultimately, the Tribunal set aside the impugned order, allowing the appeal. The decision highlighted the importance of proper invoicing for excise duty collection, as recovery without separate indication does not constitute excise duty. The judgment emphasized the necessity of compliance with invoicing requirements for excise duty recovery and clarified the inapplicability of Section 11D to exempted goods during the relevant period.