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TMI Blog2023 (8) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... RSUS MAIZE PRODUCTS [ 2008 (8) TMI 365 - HIGH COURT OF GUJARAT AT AHMEDABAD] and COMMISSIONER OF C. EX. VERSUS MAAN PHARMACEUTICALS LTD. [ 2010 (12) TMI 399 - GUJARAT HIGH COURT] . In the case of M/S. SURYA VISTACOM PRIVATE LIMITED it was held that if according to the adjudicating authority, the assessee did not abide by the provisions of Rule 6(3) of the Rules, it was open to the adjudicating authority to reject the assessee s claim as regards the disputed Cenvat credit and it could not mechanically invoke 6% Rule on the assessee. The adjudicating authority has not verified the correctness of reversal during the normal period of limitation. Therefore only for the limited purpose of verification of the amount of reversal, during the normal period, assessee s appeal needs to be remitted back to the Adjudicating authority. Assessee s appeal is remanded to the adjudicating authority, for passing a de-novo order. - HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR And HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Shri Amal Dave, Advocate for the Appellant - Assessee Shri Anoop Kumar Mudvel, Superintendent (AR) for the Respondent-Revenue ORDER RAMESH N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the Revenue s appeal, wherein the only issue involved is that demand of 10% /6%/5% equal to the value of the exempted goods is time bar or otherwise. 4.1 We find that the Adjudicating authority while dropping the demand on time bar, given the following findings: 37. Now, I come to the allegation about suppression of facts made in the show cause notice which is very vital in the case. By alleging the suppression of facts, the extended period covering five years was invoked and the show cause notice was issued. At the outset, I find that there is merit in the case of the said assessee so far as the issue of suppression of facts in the case is concerned. The record presented before me shows that the issue about the non- maintenance of records was first raised in the Final Audit Report No. 13/2006 dated 06.04.2004 covering the audit period April, 2000 to March, 2005 in the form of procedural para. This in other words mean that the department had knowledge about it as early as in the year 2004. The subsequent audit report covering the period April, 2005 to 31.05.2007 was more forth coming on the issue. The Final Audit Report No. 86/2007 dated 21.08.2007 dated 26.09.2007 did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,43,160/- on raw material consumption used in the dutiable goods. Hence you have taken more Cenvat credit of Rs. 8,80,938 (Le Rs.88,23,098/- Rs. 70,43,160/= Rs 8,80,938/-) Hence you are required to pay the central excise duty of Rs. 8,80,938/- alongwith appropriate interest. Its further noticed that the letter dated 17 08 2010 referred above was not endorsed by the auditor either to Division Office of the Range Office. Also its not clear from the available record that the said assessee has complied with payment of amount of Rs. 8,80,938/-. Further, I find that though the ratio worked out does not have any legal backing when seen through the prism of Rule 6 of Cenvat Credit Rules, 2004, it does not effect in any manner to the fact that the department was in knowledge of the practice followed by the said assessee. I, therefore, find that the extended period cannot be invoked in the facts and circumstances of the case before me. The demand has to be confined to the normal period of one year. Since the show cause notice was issued on 28.05.2014 and served to the said assessee on 29.05.2014, the period of demand under normal period covered would be applicable to the clearance of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of goods sold whichever is more in terms of Explanation 1 as contained in Rule 6(3A). This factual finding could not be dislodged by the revenue before us and we agree with the Tribunal on the said aspect. That apart, as pointed out by the Learned Advocate appearing for the respondent/assessee, a new rule has been introduced namely, sub-rule (3aa) in Rule 6 which came into force w.e.f. 1st March, 2016 which states that where a manufacturer or provider of output services has failed to exercise the above, under sub-rule (3) and follow the procedure provided under sub-rule 3(a), the Central Excise Officer, competent to adjudicate the case, based on amount of Cenvat credit involved, may allow such manufacturer or provider or output service to follow the procedure and pay the amount referred to in Clause 2(i) of sub-rule (3) with interest calculated at the rate of 15% per annum from the date of payment of amount for each of the months till the date of payment thereof. The adjudicating authority has not invoked the said rule. That apart, what is important to note is that the amount of legible Cenvat credit to the assessee was Rs. 41,17,269/- whereas the demand which was impugned be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. From the plain reading of the Rule 6(3), it can be seen that the law provided three options to the assessee (I), (II) accordingly the assessee has option either to pay 5%/10% of value of exempted goods or pay an amount determined under sub-rule (3A) i.e. proportionate credit attributed to the exempted goods. The appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004, the only lapse on the part of the appellant is that the payment of Cenvat credit was made belatedly, however the appellant have paid interest for the period right from availing the Cenvat credit till the payment/reversal of proportionate Cenvat credit which create a position as if the appellant have not availed Cenvat credit right from the date when Cenvat credit was availed. Therefore there is no reason for imposing option under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods. This issue has been considered by this Tribunal time and again, though the appellant have relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of this order. The Hon ble Tribunal in the case of Swiss Parental Pvt. Ltd. - 2014 (308) E.L.T. 81 (T) held in para 7.3 that : 7.3 We find that the ratio of the above case laws is squarely applicable to the appellant s case. We, therefore, hold that if Cenvat credit attributable to inputs used in the manufacture of exempted final products is reversed along with interest subsequent to removal of exempted final products, then the appellant cannot be said to have taken credit of inputs used in or in relation to the manufacture of exempted final products, and they need not pay an amount @ 8% or 10% of the sale price of exempted final products. The adjudicating authority has worked out the demand of Rs. 88,41,543/- on the basis of 8% or 10% of the sale price of exempted final products cleared by the appellant during the material period, while the respondent claims that the input credit attributable to manufacture of exempted final products is only Rs. 7,85,573/-, which they have reversed. In the present case we observed from the case records that the appellant has furnished relevant data/documents available at pages 372 to 396 of the appeal papers filed in Appeal No. E/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence item no. 1 of the table to Notification No. 14/2002-C.E. would apply and accordingly the grey fabrics would attract nil rate of duty. In the case of Aster Pvt. Ltd. - 2016 (43) S.T.R. 411, it was held that : The above Rule 6(3A) states that while exercising the option, the manufacturer of goods or the provider of output service shall intimate in writing the department regarding the option exercised. In the present case, admittedly there is no intimation given by the appellant informing his exercise of option. The contention 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 calculated under the first option. I am afraid I cannot endorse this contention. The said rule does not say that on failure to intimate, the manufacturer/service provider would lose his choice to avail second option of reversing the proportionate credit. Rule 6(3A), as seen expressly stated is nothing but a procedure contemplated for application of Rule 6(3). Therefore, the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest on 31-7-2010 itself and communicated to the Department whereas the show cause notice was issued only on 13-3-2012 which is beyond the period of one year and the allegation of the Department regarding suppression of fact is also not tenable because the appellant has disclosed these facts in their periodical ER1 returns filed by them. Therefore, the impugned order is not sustainable on merit as well as on limitation and therefore, I set aside the impugned order by allowing the appeal of the appellant with consequential relief, if any. 7. In view of the above, the issue is no longer res integra, therefore, the demand confirmed equal to 5%/10% of value of the exempted goods is not sustainable. As regard the submission of Ld. Counsel regarding the limitation, we find that firstly, the appellant had not utilized the Cenvat credit attributed to the exempted goods, secondly the fact regarding the availment of credit and manufacture and clearance of exempted and non-excisable goods are very much on record, therefore, the suppression of fact cannot be attributed on the part of the appellant. We also find that since the issue regarding reversal of Cenvat credit under Rule 6(3) is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the offer of the appellant-company to reverse the entire credit attributable to the exempted product covered in the nine show cause notices and accordingly we set aside the order of 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 manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Standing Counsel has reiterated the reasoning adopted by the adjudicating authority and has submitted that in the light of the provisions of Rule 6 of the Cenvat Credit Rules, 2002, it was incumbent upon the assessee to either maintain separate accounts or pay duty at the rate of 8% in case it did not opt to maintain separate accounts. 6. On the other hand, Mr. Paresh Dave, learned advocate for the respondent has invited attention to the fact that the Tribunal has placed reliance upon the decision of the Tribunal in the case of M/s. Chandrapur Magnet Wires Ltd., (supra) as well as a decision of this High Court in the case of M/s. Maize Products v. CCE-II, Ahmedabad, 2007 (79) RLT 662. It is pointed out that against the decision of the Tribunal in M/s. Maize Products, revenue had preferred appeal before this Court which came to be dismissed by the High Court in the case of Commissioner of Central Excise, Ahmedabad-II v. Maize Products, 2009 (234) E.L.T. 431 (Guj.). It was submitted that the decision of the Tribunal being in consonance with the principles enunciated by this Court as well as the Supreme Court in the above referred decisions, no case is made out to wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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