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TMI Blog2019 (2) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... for reversal of proportionate credit, the appellant had to arrive at the value of clearances by taking into consideration the value of free supplies as well as amortized cost - also the appellant has used the funded machinery for dutiable goods and has paid royalty to VSSC for such use. All these aspects have to be considered while arriving at the value of exempted clearances - All the aspects have to be considered while arriving at the value of exempted clearances - matter require to be remanded to the adjudicating authority for reworking the exempted clearance and that has to be reversed by the appellant. Non reversal of input services credit for exempted goods manufactured - period after 1.4.2008 - Held that:- The appellant fairly concedes the demand in this regard. They only contest the inclusion of the entire amortized value of plant and machinery funded by VSSC, on the grounds, inter alia that the impugned plant and machinery was also used to manufacture dutiable goods for customers other than VSSC - for the purpose of reworking the credit that has to be reversed under this issue, the matter remanded along with the above two issues to the adjudicating authority. Penalty - He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthikeyan, made oral and written submissions which can be broadly summarized as under:- 3.1 The appellant is not contesting the demand relating to Sl. No. 1 (Rs.49,15,448/-), Sl. No. 2 (Rs.4,73,544/-), Sl. No. 7 (Rs.2,71,005/-) and Sl. No.8 (Rs.18,53,440/-). However, he contends that availment of CENVAT credit in these cases had happened only due to inadvertent error / clerical mistake and not with any malafide intention. Further, the appellant had huge credit balance in the CENVAT credit account from the date of taking such credit and they had not utilized such credits taken. Hence demand of interest and also imposition of penalties are not sustainable. 3.2 The ld. counsel handed over a copy of their letter dated 26.5.2010 addressed to the jurisdictional Assistant Commissioner which had pointed out that they had paid an amount of ₹ 3,40,00,000/- through PLA over the last five years in spite of having huge CENVAT credit balance only at the request of the department. 3.3 With regard to demand at Sl. No. 3 relating to alleged incorrect reversal of CENVAT credit attributable to exempted goods, the appellant had availed CENVAT credit on steel ingots and used it in the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken into account. Similarly, in the impugned proceedings it is alleged that the entire amortized value of the plant and machinery funded by VSSC also has not been taken into account while arriving at the value of the exempted goods for the purpose of the reversal made in cases where goods were manufactured on their own. The explanation in Rule 6(3A) is effective prospectively only from 1.4.2008 onwards. Notwithstanding the same, the appellant submits that in respect of common inputs used in the exempted goods amount equivalent to CENVAT credit attributable to inputs used have to be reversed and the formula prescribed with effect from 1.4.2008 will apply only for input services and not for inputs used. Hence the demand proposed in this regard is illegal and not sustainable. 3.6 Notwithstanding the above, the plant and machinery funded by VSSC has been used by the appellant for manufacture and supply of dutiable goods to various customer for which royalty is being paid to VSSC by the appellant and hence amortization of the entire value of such plant and machinery and adding it to the exempted goods supplied to VSSC alone is not tenable. 3.7 With regard to the demand proposed in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the procedure of arriving at the value for applying the formula under Rule 6(3A), though was introduced with effect from 1.4.2008, it was just and fair that the same should be applied even for the period prior to 1.4.2008 also. 5. Heard both sides. 6.1 The appellants are availing following exemption for the excisable products manufactured and cleared from time to time:- Notification 6/2006 dated 20.3.2006 Parts of wind mills Notification 10/97 dated 1.3.1997 Steel forgings / steel rings Notification No.64/95 dated 16.3.95 Steel forgings / steel rings and aluminum forgings / rings 6.2 They entered into agreement with VSSC of ISRO by which VSSC had agreed to fund for the facility (providing machineries) to the tune of ₹ 56 crores required for the manufacture of final product. The appellant is engaged in manufacture of exempted as well as dutiable products. The first dispute is concerned with the common inputs used for manufacture of exempted goods as well as use of capital goods (machineries) given by VSSC. 6.3 The appellants are not contesting the issues in Sl. No. 1, 2, 7 and 8 and are confining the contest on these issues with regard to penalty only. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that appellant is eligible for the credit of the inputs (plastic scrap) contained in waste and scrap. On perusal of the decision, we find that the law in force during the relevant time was the erstwhile MODVAT Credit Rules. Referring to the definition under Rule 57AA(C) as well as circular of the Board dated 29.8.2000, the Hon'ble High Court observed that waste and scrap was also final products falling within the definition of Rule 57AA(C) and therefore the credit of the inputs contained in waste and scrap is eligible. However, in the matter before us, it is the CENVAT Credit Rules, 2004 which applies. Under Rule 6 of these Rules, there is nothing to show that waste and scrap are also final products. In fact, Rule 6 specifically states that credit cannot be availed on inputs used for manufacture of exempted final products. The said Rule also contain provisions to work out the quantum of eligible credit when common inputs are used for exempted products as well as dutiable products. All this would go to show that credit is not eligible on inputs used for manufacture of exempted final products. The said Rule does not make any separate dispensation when the waste and scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand for April 2008 to March 2010 has been arrived as ₹ 16,51,465/-. It is seen from the records as well as from the submissions made by the ld. counsel for the appellant that while arriving at the value of exempted products for the purposes of reversing the credit as per Rule 6(3), appellant has taken into consideration only the job charges. It is their contention that the Explanation in Rule 6(3A) has been introduced only with effect from 1.4.2008. This Explanation lays down the formula to arrive at the value of exempted clearances. The appellant therefore contends that the formula prescribed as per Rule 6(3A) and the Explanation therein would be applicable only with effect from 1.4.2008 and not prior to this period. Another contention raised is that the plant and machinery funded by VSSC has been used by the appellant for manufacture of not only exempted goods (not for VSSC) but also for manufacture of dutiable goods of various customers for which royalty is paid to VSSC by the appellant. That therefore the amortization of the entire value of such plant and machinery and adding the same to arrive at the value of exempted clearances is not correct. After taking into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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