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TMI Blog2009 (4) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Sunder Singh, Dy. General Manager, for the Appellant. Ms. Joy Kumari Chander, Jt. CDR, for the Respondent. [Order per : T.K. Jayaraman, Member (T)]. This Appeal has been filed against the Order-in-Original No. 6/2008 dated 2-6-2008, passed by the Commissioner of Customs, Excise and Service Tax, Guntur. 2. S/Shri N. Venkataraman, Sr. Counsel, S. Muthu Venkataraman and S. Dakshna Moorthy, Advocates appeared on behalf of the appellants and Ms. Joy Kumari Chander, Jt. CDR appeared for the Revenue. 3. The appellants are manufactures of Stearic Acid, Fatty Acid, Fatty Acid Pitch, etc. falling under Chapter 38 and 15 of Central Excise Tariff Act, 1985. These products are dutiable products. Further they manufactured the exempted finished products, namely Vanaspathi, Bakery Shortening Inter-esterified fat, Margarine, Refined oils, etc. falling under Chapter 15 of CETA, 1985. They used the following common inputs :- (i) Crude palm oil (ii) Hydrogen Gas (iii) Nickel Catalyst 4. The Revenue proceeded against the appellants on the ground that the appellants were required [under Rule 6(3)(b) of the Cenvat Credit Rules, 2002/2004] to maintain separate acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed Hydrogen Gas and Nickel Catalyst in the manufacture of both vanaspathi (exempted) and stearic acid (dutiable). They availed credit on Nickel Catalyst on pro-rata basis and were maintaining separate account of Nickel catalyst used as common input both in manufacture of dutiable and exempted final products. But they admitted that maintaining separate registers and accounts for another common input i.e. hydrogen gas in the manufacture of both the dutiable and exempted final product was not technically feasible. The Commissioner has rejected the appellant s argument that taking Cenvat credit on common input namely, hydrogen gas on pro-rata basis without maintaining any statutory register for receipts, consumption and inventory separately for manufacture of both dutiable and exempted final products was correct. Therefore, she confirmed the demands made in the show cause notices. She has relied on the decision of the Larger Bench of the Tribunal in the case of Rallies India Ltd. v. CCE, Salem [2007 (208) E.L.T. 25 (Trib. - L.B.)] in her order. She did not follow the ratio of the other case laws cited by the appellants in their favour. The appellants are highly aggrieved over the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Commissioner failed in holding that the appellants had not maintained separate registers. Vide Paragraph 25, the Commissioner referred to the submission of the appellants that they had availed Cenvat credit on duty, paid for hydrogen gas only on pro-rata to the extent of use in the manufacture of dutiable final products. This finding goes to vindicate the stand of the appellants that they maintained separate records and had availed pro-rata credit. The work register and bin cards along with invoices appropriating pro-rata credit has always been part of the adjudication proceedings and the factum of maintenance of separate accounts never in dispute. (iii) In the above circumstances, the only question that arises for consideration is whether in terms of Rule 6 of the Cenvat Credit Rules, 2004, an assessee should maintain separate inventory or would it be sufficient if an assessee maintains separate accounts for receipt, consumption and inventory of inputs services. A plain reading of Rule 6(2) of the Cenvat Credit Rules provides the answer. The expression employed in the said sub rule is the manufacturer or provider of output service shall maintain separate accounts for receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice credit along with interest of Rs. 74,441/- aggregating Rs. 3,90,415/- was completely paid to the Revenue on 28-1-2008. As the entire input service credit had been reversed, the question of invoking Rule 6 does not arise and the learned Commissioner in the impugned order has not disputed these facts. In fact, vide Paragraph 26 of the order, the facts and figures as submitted above, were duly referred but proceeds to conclude that the reversal was done to correspond to their own policy of taking credit pro-rata and not in full compliance of Rule 6(3)(b) of the Cenvat Credit Rules. Further, it was held that the appellants should have paid it in advance before waiting for the Department to point it out and issue show cause notices. It was reiterated that the entire credit had been reversed and there is no question of pro-rata availment to come within the ambit of Rule 3 of the Cenvat Credit Rules, 2004 and consequently the finding of the Commissioner is not maintainable. In any view, this issue is no longer res-integra in view of the decision of the Larger Bench in case of Nicholas Piramal (I) Ltd. v. CCE, Thane-I [2008 (89) RLT 566 (T) (L.B.) = 2008 (232) E.L.T. 37 (Tribunal-LB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO [1991 (4) SCC 560] wherein it was held that an interpretation which will result in anomaly or absurdity should be avoided. The learned Sr. Counsel highlighted the following facts :- (i) The entire input service credit taken has been reversed, though after availment, with interest. (ii) There has been no abuse of process or misuse of any provisions. The appellant has not even attempted to claim any undue benefit. (iii) The total input service credit is Rs. 3.15 lakhs whereas the amount of demand raised in the show cause notice is over Rs. 16 crores. (iv) It is not proportionate credit but the entire credit taken on inputs which had been reversed. (v) No reasonable or prudent man would prefer a beneficial enjoyment of Rs. 3.15 lakhs at the cost of Rs. 16 crores. The rule of literal interpretation is not an inflexible rule as held in the minority view. (c) Legal Maxim. De Minimis Non Curat Lex . It means - Diminutives are not noticed by law i.e. law cares not for small things. The law does, not notice or concerns itself with trifling matters. Courts of justice generally do not take trifling and immaterial/matters into account, except under peculiar circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application : The minority view was pleased to hold that the amendment carried out to Rule 6 of the Cenvat Credit Rules by introducing Rule 6(3A) with effect from 1-4-2008 permitting reversal of credit attributable to be worked out in a manner prescribed is not retrospective is incorrect for the following reasons :- (i) Rule 6(3A) is not a substantive provision but a procedural provision. (ii) Eligibility to credit which is substantive is dealt under Rule 3 of the Cenvat Credit Rules. Rule 6 only deals with an obligation which a manufacturer or an output service provider should comply with in such cases where they are engaged in the manufacture of dutiable/exempted goods or taxable/exempted services. (iii) Rule 6(2) obligates maintenance of separate accounts for receipt, consumption and inventory of input and input services meant for use to the manufacture of, dutiable final products or in providing output services. (iv) Rule 6(3) and Rule 6(3A) provide the mechanism to pay either an amount equivalent to 10% of the value of the exempted goods or 8% of the value of the exempted services. In the alternative Rule 6(3A) provides the manner of determination and payment of amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Income Tax v. Pooranmal Sons [1975 (4) SCC 568] wherein it has been held that the question whether a certain provision of law is directory does not fall to be decided on different standards because it is found in a taxing statute. There is no rule that every provision in a taxing statute is mandatory. (g) The demand for show cause notice dated 4-9-2007 is substantially time barred. The extended period is not favourable to the Revenue as the appellant had not suppressed any information. Hence penalty cannot levied. Levy of penalty is not automatic. Revenue has not given any evidence with regard to suppression. Onus to prove is on the Revenue. End use certificates have been quarterly/half yearly issued by the department after examining all previous production records. Hence they are aware of the use of all inputs. Audit party who visited the appellant s factory have gone through all the records, such as bin cards, work register purchase invoices of hydrogen gas and nickel catalyst, Cenvat Credit Register, etc. They were fully aware of methodology of availing credit on proportionate basis and never commented about maintaining insufficient records. The Revenue has not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the demand of 8%/10% of the amount confirmed. Interest also has been demanded. The assessee had used the following inputs :- (i) Crude palm oil (ii) Hydrogen Gas (iii) Nickel Catalyst The main allegation is that they did not maintain separate accounts for receipt, consumption and inventory of the inputs as prescribed in the Cenvat Credit Rules, 2002/2004. It is seen that the appellants had not taken entire credit on the duty paid on the inputs used in dutiable and exempted products. It is on record that they had availed credit on pro-rata basis. In other words, the credit has been taken only in respect of inputs used in dutiable products. It is a fact that the appellants have stated that they could not have separate inventory for the input used in dutiable and exempted products. That does not mean that they have not maintained separate accounts for the receipt and consumption of inputs used in dutiable and exempted products. A distinction was made between maintain separate inventory and accounts of inventory referring to Rule 57CC(9) and Rule 6. Our attention was invited to the sample copies of the work register for consumption details of the inputs along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een that they had reversed the entire credit on 28-1-2008 along with interest. In spite of all these, the Commissioner imposed a penalty of Rs. 10,000/- The learned Sr. Advocate relied on the decision of the Larger Bench of the Tribunal in the case of Nicholas Piramal (I) Ltd. v. CCE, Thane-I. [2008 (89) R.L.T. 566 (Tri. - L.B.) = 2008 (232) E.L.T. 37 (Tribunal-LB)]. In the said case, it has been held that when the entire credit has been reversed, it would tantamount to non-availment of credit and the rigours and consequences of Rule 8(3)(b) would not follow suit. 10. The learned Advocate took the point stressed on the untenability of minority view in Nicolas Piramal (I) Ltd. case (supra). He relied on the several decisions of the Hon ble Apex Court and also authoritative legal treatises. Inadvertently, the appellant had taken input service tax credit in the entire amount instead of pro-rata basis. When the lapse was pointed out the entire credit was reversed. In other word an act which is done has been undone. This is called a Principle of Restoration . The original position is restored, when an act done is undone. In the context of the present case, the reversal of entire inp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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