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TMI Blog2024 (6) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... UDICIAL) AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri Atul Gupta, Advocate for the Appellant Shri Manish Raj, Authorised Representative for the Respondent ORDER This appeal is directed against order in original No KNP-EXCUS-000-COM-026-14-15 dated 30.01.2015 of the Commissioner Central Excise and Service Tax Kanpur. By the impugned order following has been held: ORDER (i) I confirm the demand of amount of Rs. 8,23,01,521.00 (Rs Eight Crore Twenty Three Lakh One Thousand Five Hundred and Twenty One only) against value of exempted services of Rs 1,37,16,90,114.00 and order for recovery of the said amount from them under the proviso to sub Section (1) of Section 73 of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of Cenvat Credit Rules, 2004 also order for appropriation of amount of Rs.76,922/- and Rs.2,10,355/- deposited by the party as reversal of credit towards payment of amount. (ii) I also confirm the demand of Interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994. I also order for appropriation of amount of Rs.46903/- and Rs. 3,457/- deposited by the party as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltancy services, Transportation of Goods through Pipelines etc, but they did not maintain any separate accounts for receipt and their use in or in relation to manufacture of dutiable final products and for exempted services, as provided in Rule 6 of Cenvat Credit Rules, 2004. They also did not exercise the option of proportionate reversal of Cenvat credit as provided under Rule 6(3A) of the CER,2004. 2.3 A show cause notice dated 06.05.2014 was issued to the appellant asking them to show cause as to why: (1) The amount of Rs. 8,23,01,521.00 (Rs Eight Crore Twenty Three Lakh One Thousand Five Hundred and Twenty One only) against value of exempted services of Rs 1,37,16,90,114.00 should not be demanded and recovered from them in terms of the provisions of Section 73 (1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3)(i) of Cenvat Credit Rules, 2004 and the amount of Rs.2,87,277/- deposited voluntarily by the party aginst the aforesaid dues should not be appropriated. (2) Interest as applicable during the relevant period should not be recovered from them under the provisions of Section 75 of the Finance Act, 1994 read with Rule 6 of the CENVAT Credit Rules, 2004 and interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,01,521.00 is demandable and recoverable from them in terms of the provisions of Section 73(1) of the Finance Act, 1994 read with Rule 14 and Rule 6(3) (i) of Cenvat Credit Rules, 2004 and the amount of Rs. 2,87,277.00 deposited voluntarily by the party is liable for appropriation. II. Whether interest as applicable during the relevant period is recoverable from them under the provisions of Section 75 of the Finance Act, 1994 read with Rule 6 of Cenvat Credit Rules, 2004. III. Whether penalty is liable to be imposed upon them under Section 76 of the Finance Act 1994 read with Rule 15 of the Cenvat Credit Rules. IV. Whether penalty is liable to be imposed upon them under Section 77 of the Finance Act. V. Whether penalty is liable to be imposed upon them under Section 78 of the Finance Act, 1994. 1994 read with Rule 15 of the Cenvat Credit Rules, 2004 70. At first, I take up the said issues mentioned at no. (i) above. It is a settled principle that Cenvat Credit is not available, if input or input services are used in the manufacture of exempted goods or provisions of exempted output services. As a natural corollary, if no duty is payable on final product or output service, credit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom suppliers in bills and is marked as Natural Gas and PMT, in the ledger maintained These are the gas which is used solely for producing CNG and therefore, alleging that they were not maintaining any separate records is wholly baseless and contrary to the facts on record. Further, they submitted that the Rule 6(2) of the Cenvat Credit Rules 2004 merely requires maintenance of separate books of accounts for receipt and use of input services, in or in relation to the manufacture of the dutiable goods or the taxable output services and the ledger being maintained by them would clearly prove the maintenance of proper records of receipt and use of the input services, that is NG/PMT (APM) and the other Natural Gas. Besides they were maintaining proper dispenser wise records of quantity of CNG gas being sold from each of the CNG station 75. I observe that the departmental allegation is very specific as it says that the party is manufacturing CNG, a dutiable product and paying appropriate duty. At the same time they are trading PNG which is exempted service under Rule 2(e) of the Cenvat Credit Rules,2004 by virtue of Circular No.943/4/2011- CX dated 29.04 2011. The party has taken credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as PNG. M/s GAIL/BPCL in fact releases the gas from their base point, i.e. Hazira to GAIL through pipeline and from GAIL to tap up point of the party in the form of Natural Gas (NG) which passes through their own gas pipeline and reaches to the pipeline owned by the CUGL at their respective stations that is at Fazalganj and Chakeri in Kanpur. Total receipts of gas is first measured at TAP up point at Fazalganj/ Chakeri and accounted for as purchases in the accounts of the party. From Fazalganj and Chakeri the said NG further routes to various CNG stations of the party where the compressor/dispenser are installed. The compressor/dispenser is the machine required for producing CNG and distributing or supplying the same to the consumer. At the CNG stations such gas immediately gets converted into CNG by use of compressor and is sold to ultimate consumer through dispenser. This is the stage where the measurement of gas takes place, both for the quantity of NG purchased and the quantity sold as CNG to the consumers. Therefore, the process as explained by the party itself establishes that from GAIL, NG is supplied to the stations of CNG through pipeline, from where such natural gas aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Rule 6/(3A) of Cenvat Credit Rules, 2004 for the period April, 2009 to December, 2010 and the same was duly exercised The party has submitted that they had reversed the Cenvat credit of Rs 76,922/- taken on seven invoices of M/s GAIL (India) Limited related to PNG trading for the period April 2010 to October 2010 The sum of Rs 76,922/- alongwith interest of Rs. 46.903/- (total Rs. 1,23,825/-) have been reversed vide challan No. 209 dated 12.11.13 as prescribed under Rule 6(3A) of the CENVAT Credit Rules 2004. The department, on the other hand has alleged that the payment as reversal of Cenvat credit has been made in a manner other than as provided in the Rules 80. I have also gone through the amended provisions of the law with regard to above submissions. I notice that a detailed procedure has been laid down for calculation and reversal of amount on account of proportionate basis. The procedure as per sub-rule 3(A) of Rule 6 is as under:- (3A) For determination and payment of amount payable under clause (i) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions- (a) while exercising this opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Larger Bench not right in allowing reversal of credit on inputs instead of payment of 8% or 10% of price of exempted goods as per rules - Rule 57C or Rule 57CC of erstwhile Central Excise Rules, 1944 not considered by Supreme Court in 1996 (81) E.L.T. 3 (S.C.) and ratio therein not applicable to construe Rule 6 of Cenvat Credit Rules, 2002 (now Rule 6 of Cenvat Credit Rules, 2004) - Hardship in maintaining accounts or following rule not makes rule absurd or unjust - Difficulty realized and presumptive tax provided in rules - Rule 6(2) ibid mandatorily applicable once dutiable and exempted final products manufactured from common inputs and credit can be availed only in terms of Rule 6(3) ibid - Credit admissible only as per method prescribed and assessee not having choice of claiming or reversing credit - Impugned order holding payment of 8% or 10% amount not required if credit reversed on inputs used in exempted goods, not agreed with - Rule 57CC of erstwhile Central Excise Rules, 1944. 84. And in the para 13 of the aforesaid judgment, it was held by the Hon ble High Court, Bombay that- 13 . On a consideration of Rule 57CC, it is clear that if inputs are used in the manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 12 weeks from date of order - Subject to said deposit, balance of duty stands waived - Rule 6 of Cenvat Credit Rules, 2004 - Section 35F of Central Excise Act, 1944. [para 5] (ii) M/s Ghodawat Foods International Pvt. Ltd. Vs. C.Ex. Pune reported in E.L.T, 2008 (229) ELT 261 (Tri.-Mumbai)-Final Order No. A/384/2008-WZB/C-li/(SMS), dated 15-4-2008 in Appeal No. E/700/2007 reported in 2208(229)ELT261(Tri-Mumbaia) holding that- Demand and penalty - Cenvat/Modvat - Common Inputs used in manufacture of exempted as well as dutiable final product - Separate account not maintained - 10% amount of the exempted products cleared from the factory manufactured by using such inputs payable - Demand upheld - However, credit having not been taken with intention to evade payment of duty, penalty under Rule 15 of Cenvat Credit Rules, 2004 unwarranted - Rule 6 ibid. [paras 8, 10, 11] (iii) Ms Bharat Heavy Electricals Ltd. V/s Commissioner of Cus. C.Ex. Bhopal reported 2003 (160) E.L.T. 928 (Tri. - Del.)-Final Order No. A/316/2003-NB (C), dated 24- 6-2003 in Appeal No. E/1788/2001-NB(C) holding that:- Cenvat/Modvat - Modvat on inputs - Credit availed on inputs used for manufacture of conditionally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses Piped Natural Gas (PNG) from various manufacturers like Gas Authority of India Ltd. (GAIL) and sells the same as it is. Thus, the respondent is engaged in the manufacture of dutiable goods (CNG) as well as in trading activity of the dutiable goods (PNG). During the period under consideration, the credit was availed by the respondent on various input services exclusively used for manufacturing activity and common input services used for manufacturing as well as trading activity. The department opined that the respondent has not maintained separate accounts in respect of the common input services utilised by them nor had they opted for the option under Rule 6(3)(ii) of the Credit Rules, by following the procedure in that regard. Accordingly, the audit was of the view that the respondent is liable to pay amount @ 6% of the exempted service, in terms of Rule 6(3)(i) of the Credit Rules. 3. With this background, we heard Sh. H.C. Saini, ld. AR for the Revenue who submits that Revenue has relied on the show cause notice. He submits that the respondent assessee has neither intimated the department regarding its value in their ER-1 and ST-3 return. 4. On the other hand, Sh. Amit Jain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advantage of taking full credit on all common input services. This will have effect of nullifying the very principle that no credit is available when there is no taxable output service. In other words, it is very clear that the respondent is eligible to take credit on only such input services, which are attributable to taxable output services. If there are common input services, without separate accounts, it is necessary for the respondent to avail so much of credit only, which are attributable to the taxable output service. This can be enforced by way of reversal of credit attributable to trading activities. We find that the legal position has been examined and decided by the Tribunal in Mercedes Benz India Pvt. Ltd. 2014 (36) STR 704 (Tri. Mum.). The said decision was affirmed by the Hon ble Bombay High Court reported in 2016 (41) STR 577 (Bom.) and SKF India Ltd. (ISD) - 2016 (44) STR 61 (Bom.) . 6. Similarly, the issue was dealt with by the Tribunal in the case of Dalmia Bharat Sugar Industries Ltd., vs. CCE -2017-TIOL-113-CESTAT-DEL where it was observed that- 8. We find that the coordinate Bench of this Tribunal in the case of Mercedes Benz India Pvt. Ltd. v. C.C.E., Pune I 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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