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TMI Blog2018 (8) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not be eligible to avail exemption under Notification No.39/2009-ST dt. 23.09.2009 since they have failed to satisfy the conditions stipulated therein. Hence a show cause notice dt. 29.01.2015 was issued to appellants, inter alia proposing demand of service tax of Rs. 17,57,21,870/- with interest thereon as also imposition of penalties under Section 76, 77 & 78 of the Finance Act, 1994. Notification No.39/2009-ST provides exemption from so much of the value which is equivalent to the value of inputs, excluding capital goods used for providing the taxable service subject to conditions, inter alia that no cenvat credit has been taken under the provisions of Cenvat Credit Rules, 2004. It emerged that the appellants had availed and utilized cenvat credit on capital goods and inputs service and have utilized such credit for payment of service tax. It therefore appeared to department that appellants had failed to satisfy the condition stipulated in the said Notification No.39/2009-ST and as such they would be liable to pay service tax on the gross amount charged by them from USL. In adjudication, the Commissioner vide impugned order dt. 30.09.2015 confirmed demand of service tax as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of Rs. 1,22,93,434/- being the amount of service tax paid through cenvat credit along with applicable interest. Ld. Advocate also informs us that appellants have already predeposited Rs. 1,31,80,000/- vii) There was lack of clarity on levy of service tax on the activity of contract bottling of alcoholic liquor for human consumption. In fact, the matter is not still free from doubt since it is pending before the Apex Court. The condition in exemption notification No.39/2009 restricting availment of cenvat credit of duty paid on capital goods is contradictory to provisions of Cenvat Credit Rules, 2004. As there are various matters of interpretation still in dispute penalty imposed under Section 78 of the Act is not justified and may be set aside. However, appellant submits that they would pay the penalty imposed under Section 77 of the Act. viii) As the appellants have already made predeposit of Rs. 1,31,80,000/- against the confirmed demand of Rs. 1,22,93,434/- the credit availed should be considered as having been reversed only interest is then required to be paid which the appellant would be paying up as per applicable rates. 3. On the other hand, on behalf of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the appellants cannot take shelter under the aforesaid judgment of the Hon'ble Supreme Court, inasmuch as, it has been clearly held therein that such reversal should be made before removal of the exempted final product. That is, to avail the exemption Notification of impugned nature the appellants should have debited the CENVAT Credit before utilizing the same for payment of tax. v) The Hon'ble Supreme Court decision in the case of Union of India vs. Intercontinental Consultants & Technocrates Pvt. Limited relied on by the appellant is not applicable to this case as the Hon'ble Court was not considering the inclusion of elements of value in the context of any condition of exemption. vi) Ld. A.R placed reliance on the following case laws : (i) Go Go International P. Ltd vs Commr. of Cus. (Export), Nhava Sheva - 2010 (255) ELT 81 (Tri. Mumbai) (ii) Kamra Bottling Company vs. CCE, Jaipur - 2009 (233) ELT 329 (Raj.). 4. In response, Ld. Advocate pointed out that as per the ratio laid down by the Allahabad High Court in Hella Minerals Water (supra), reversal of credit should be done before availing the benefits of notification and time of reversal is not material. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued on earlier date for the first objection cannot be put forth as a ground that second SCN issued subsequently is barred by limitation. Hence this contention of the appellant is found wanting and is therefore rejected. 6.3 The appellant has also contended that issue of taxability of activity of contract bottling is still pending before the Hon'ble Apex Court since appeal of International Spirits & Wines Association of India (ISWAI) has been admitted as reported in 2017 (50) STR J 152 (SC). Be that as it may, we find that Notification No.39/2009-ST concerns the manner of taxability of BAS provided by an assessee by way of manufacture or processing of alcoholic beverages for or on behalf of the service recipient. As per the notification for calculating taxable value, the value of inputs excluding capital goods, used for providing said service is to be excluded, provided the assessee satisfies the conditions (a), (b), (c) thereof; in particular, not taking any cenvat credit and there is documentary proof indicating the value of such inputs. Evidently then, the notification seeks to exclude predominant portion of the materials‟ cost. In any case, we find that the taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moreover, Rule 57C specifically provides that credit of duty cannot be allowed if final products were exempt from payment of excise duty. Faced with this situation, the appellants reversed the credit entries of duty paid on inputs which were utilised for manufacture of the duty free copper wires. 5. The case of the Excise Department is that the reversal of credit entries are not permitted by the rules. The assessee is not entitled to remove the copper wires without payment of duty since credit of the duty paid on the inputs used in the manufacture of copper wire had already been taken in accordance with Rule 57A. Once appropriate entries have been made in the register, there is no rule under which the process could be reversed. Since the credit has been taken for the duty paid on the inputs in the ledger maintained by the assessees, the assessee cannot be heard to say that no credit of the duty has been taken by it under Rule 57A. 6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in manufacture of these goods." 6.6 In the Hello Minerals case (supra), the Hon'ble High Court of Allahabad relying inter alia, on the above Supreme Court judgment in Chandrapur Magnet Wires case has held that in a case where the exemption is subject to non-availment of modvat credit on inputs, subsequent reversal of modvat credit amounts to non-taking of credit on inputs. The High Court has also held that reversal of such credit can be made even subsequent to clearance of the final product. As per the facts of the Hello Minerals (supra) case, the reversal of the inputs was done at the Tribunal‟s stage. The Hon'ble High Court referred to the Tribunal decisions in the case of Tube Investments of India [Final Order No.795/2012]; High Line Pen Vs CCE- Final Order No.359/2003 [2003 (158) ELT 168 (Tri)]; Kitply Industries Ltd. - 2001 (130) ELT 236 (Tribunal) and Bharat Earth Movers Ltd. - 2001 (136) ELT 225 (Tribunal) and held that the petitioner therein is entitled to benefit of Notification No.15/94-CE even when reversal of modvat credit on the inputs has been done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal has followed the ratio of the decision of the Supreme Court in the case of Chandrapur Magnet Wires (supra). 30. In these circumstances the order of the Tribunal dated 1-10-2003 in so far as it relates to denial of the benefit of Notification No. 15/1994- CE is liable to be, and is hereby, set aside. The petitioner is thus entitled to the benefit of the said Notification No. 15/1994-CE, dated 1-3-2004 and reversal of Modvat credit on the inputs namely PVC granules used in the manufacture of PVC/PP bottles, which have been admittedly reversed by the petitioner, even though after clearance of the final product." [Emphasis supplied] 6.7 We further find that the Hon'ble Apex Court in the case of Precot Meridian Ltd. - 2015 (325) ELT 234 (SC) referring to Five-Member Bench of the Tribunal in Franco Italian Co. Pvt. Ltd. Vs UOI - 2000 (120) ELT 792 (T-LB) and that of the Allahabad High Court order in Hello Minerals (supra), has affirmed the view that reversal of cenvat / modvat credit amounts to non-taking of credit. The relevant portion of the said judgement is reproduced below : "Indubitably, the benefit of exemption Notification No. 5/99-C.E., dated 28-2-1999 is available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for duty exemption, will now become available to the appellant. 7.2 In the SCN dt. 29.01.2015, as per Annexure III thereto, details of cenvat credit availed during the impugned period October 2009 to June 2012 have been given. The total credit taken by appellant during the period has been worked out to Rs. 1,22,93,707/-. To have been eligible for the benefit of Notification No.39/2009-ST, no cenvat credit whatsoever could have been taken. This being so, the said credit of Rs. 1,22,93,707/- should not have been taken by the appellants. However, in view of the discussions herein above, and in particular relying on the ratio of the decisions cited and discussed in paras 6.3 to 6.7 as above, we are of the considered opinion that even at the Tribunal stage if the appellant reverses the credit amount of Rs. 1,22,93,707/- taken during the impugned period and also pays up the interest liabilities applicable thereon, condition (a) of Notification No.39/2009-ST will be satisfied and the exemption provided in the notifications will be available to them, and the net service tax liability will then be calculated as per the provisions of that notification. 7.3 We also find that the Annexure-I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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