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TMI Blog2021 (11) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not covered under the retrospective amendment brought under Finance Act, 2010, if the assessee reversed the proportionate Cenvat Credit in respect of input/input service attributed to exempted goods even though belatedly but with interest, the demand of 5%/10% of the value of exempted goods is not sustainable as held in the following judgments:- * 2009 (244) ELT 321 (Bom) - CCE, Thane-I Vs. Nicholas Piramal (I) Ltd * 2009 (240) ELT 661 (SC) -CCE Vs. Gujarat Narmada Fertilizers Co Ltd * 2018 (17) GSTL 422 (Del) - Lally Automobiles P Ltd Vs. Commissioner (Adjudication) * 2018 (17) GSTL 181 (Gu) - CCE, Vadodara-Il Vs. Unimed Technologies Ltd * 2018 (16) GSTL 257 (Raj) - Modern Insulators Ltd Vs. Additional CCE, Jodhpur * 2014 (33) STR 440 (Tri-Kol) - Tata Steel Ltd Vs. CCE, JSR * 2004 (178) ELT 55 (SC) - State of Jharkhand Vs. Ambay Cements * 2017 (5) GSTL 225 (Mad) - Ruchika Global Interlinks Vs. CESTAT, Chennal * High Court of Gujarat in Appeal No. R/Tax No. 571/2019 - CGST Vs. Bombay Minerals Ltd * 2008 (221) ELT 481 (SC) - Mathania Fabrics Vs. CCE, Jaipur * 2010 (256) ELT 369 (Guj) - CCE, Surat-I Vs. Neminath Fabrics Pvt Ltd 3. Shri Vinod Lukose, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put services attributed to the exempted goods/non-excisable goods along with interest, whether the demand confirmed by the Revenue under Rule 6(3) i.e. 5%/10% on value of exempted goods is legal and proper. The appellant is not disputing that the Cenvat credit in respect of input services attributed to exempted goods namely Steam, Fly-Ash and non-excisable goods i.e. electricity sold outside their factory, is not admissible and they have admittedly reversed the proportionate Cenvat credit and also paid the interest from the date of taking credit till the date of reversal. For ease of reference, we reproduce below the Rule 6(3) of Cenvat Credit Rules, 2004 : (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely :- (i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six per cent. of value of the exempted services; or (ii) the manufacturer of goods or the provider of output serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of this judgment of the Hon'ble Supreme Court, the reversal of Cenvat credit already made by the appellant is to be considered as not taken ab initio. The Government has introduced the facility of proportionate reversal w.e.f. 1-4-2008 to mitigate the difficulties faced by manufacturers to maintain separate accounts for inputs/input services as well as when the same are commonly used for dutiable as well as exempted products/services. Though detailed procedure starting with an option to be exercised by manufacturer has been prescribed, in the present case, the appellant has not followed the same. However, it is on record that they have already reversed an amount claimed to be proportionate. It is also pertinent to record that this has been done by the appellant even before the issue of the show cause notice in this case. We are of the considered view that the failure of the appellant to follow the procedure perfectly should not come in the way of extending the substantial benefit of proportionate reversal. However, we find that in the order passed by the lower authority, he has not given any finding as to whether the reversal already made satisfies the test of proportionate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of Rs. 88,41,543/-, on the basis of 8% or 10% of the sale price of dutiable and exempted final products, is not maintainable. We, therefore, remand the matter to the adjudicating authority for proper verification of appellant's claim of reversal of Cenvat credit on inputs attributable to manufacture of exempted final products on the basis of appellant's records after affording opportunity to the appellant to explain their case before deciding the issue of quantum of Cenvat credit in remand proceedings." * The Hon'ble Supreme Court in the case of Bombay Dyeing & Mfg. Co. Ltd. - 2007 (215) E.L.T. 3 held in para 8 that : "8. There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-C.E., the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anes & Structural Engineers - 2017 (347) E.L.T. 112 (T) held in para 4.1 that : "4.1 On analysis of Rule 6(3A), I find that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing to the Department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing the exercise of his option. The argument of the Department is that when the appellant has not intimated his option in writing then the appellant is bound to pay the duty amount calculating under the first option. According to me, this argument is devoid of merit, because the said Rule does not say anywhere that on failure to intimate, the manufacturer/service provider would lose his right to avail second option of reversing the proportionate credit. Sub-rule (3A) of Rule 6 is only a procedure contemplated for application of Rule 6(3). Consequently, the argument of Revenue is that the appellants exercising option is mandatory and on its failure, the appellant has no other option but to accept and apply Rule 6(3)(i) and make payment of 5%/10% of the sale price of the exempted goods or exempted services is not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly the same is maintained. The demand under Rule 6(3)(i) i.e. 5%/10% of value of the exempted goods and all the penalties are set aside. The appeal is allowed in the above terms. * CESTAT Ahmedabad Final Order No. A/12299/2021 dated 04/08/2021 in case of M/s. P&B Pharmaceuticals Limited. 4. We have carefully considered the submissions made by both the sides and perused the record. We find that there is no dispute about reversal of credit on input services attributed to exempted goods. It is also observed that appellant have paid Cenvat credit and wherever there is delay in such payment, the appellant paid interest. In this position, it should be considered as if the appellant have not availed Cenvat credit. Accordingly, Rule 6(3) of Cenvat Credit Rules, 2004 shall not be invoked. We find that in the appellant's own case, this Tribunal vide order dated 26.08.2010 decided the same issue as under:- 4. After appreciating the submissions made by both the sides, we find that the law on the disputed issue is clear by the various decisions referred supra. As regards the fact of reversal of modvat credit, we find from the impugned order in original passed by the Additional Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Commissioner confirming the demand in respect of the nine show cause notices with the direction to consider and accept their offer to reverse the entire credit on the common inputs i.e. caustic soda lye and hydrochloric acid. The department shall re-determine the credit taken on the common inputs i.e., caustic soda lye and hydrochloric acid in so far as they relate to demand proposed in the 9 show cause notices. The assessee shall produce the necessary evidence in the form of chartered accountant's certificate for the relevant period. If any further credit is to be reversed, the same shall be reversed within four weeks from the date of receipt of the communication from the department." 5. The appellant has produced relevant extracts from the relevant Rule of Cenvat Credit Rules, 2002 which relates to obligation of manufacturer of dutiable and exempted products. Under sub-rule (2) of the said Rules, a manufacturer is required to maintain separate accounts regarding inputs used for manufacturing of dutiable products and inputs used for manufacturing of exempted products. However, sub-rule (3) stipulates that, in a case where the manufacturer opts not to maintain separate acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Maize Products (supra). In the case of Commissioner of Central Excise v. Maize Products, this Court has held as follows :- "5. The appellant has produced relevant extracts from the relevant Rule of Cenvat Credit Rules, 2002 which relates to obligation of manufacturer of dutiable and exempted products. Under sub-rule (2) of the said Rules, a manufacturer is required to maintain separate accounts regarding inputs used for manufacturing of dutiable products and inputs used for manufacturing of exempted products. However, sub-rule (3) stipulates that, in a case where the manufacturer opts not to maintain separate accounts, the manufacturer shall follow either condition (a) or condition (b), as the case may be. Under the Rule, Explanation-1 provides that the amount mentioned in any of the conditions shall be paid by the manufacturer by debiting the Cenvat credit or otherwise. 6. Thus, in effect, the directions issued by the Tribunal are merely in consonance with the requirement of the relevant rule, and it is not possible to state that the Tribunal has committed any error in issuing such directions. The respondent assessee having accepted before the Tribunal to reverse the Cenvat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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