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TMI Blog2024 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... since royalty charges are paid in respect of both domestically manufactured and imported bottle closures, these are common input services and therefore the appellants are required to maintain separate account for common input services utilised in dutiable as well as exempt/non-taxable trading service. Further, they are required to pay an amount equal to prescribed percentage of the value of exempted traded goods, considering it as exempted services as defined under Rule 2(e) of the CCR, 2004. It is on record that the appellants have already calculated the value of trading of bottle closures during the period June, 2016 to December, 2016 and had duly discharged the amount to be reversed as per Rule 6(3) of the CCR, 2004 including the interest and 15% penalty, before issuance of the SCN. However, neither the original order nor the impugned order have gone into the details of such facts, to either examine, scrutinise the fact that such payment is as per CCR, 2004 or to record the reasons as to why the same is not acceptable. Thus, the difference between the above figures being Rs. 3,86,170/- and 10% of the cost of the traded goods has been worked out as Rs.71,55,278/-, and the higher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the appellants along with interest and penalty, and had directed the original authority for redetermination of the actual amount of CENVAT to be paid under Rule 6(3) of the CCR, 2004 and interest thereon, after taking into account the option chosen by the appellants in terms of Rule 6(3AA) ibid, for determination of the amount payable by the appellants. However, the portion of the impugned order at paragraph 14(iv) therein, imposing penalty on the appellants is set aside. Appeal allowed in part. - MR. M.M. PARTHIBAN, MEMBER (TECHNICAL) Shri. C.S. Biradar, Advocate for the Appellants Shri C.S. Vinod, Authorized Representative for the Respondent ORDER This appeal has been filed by M/s Guala Closures (India) Private Limited, Goa (herein referred to as the appellants for short) against Order-in- Appeal No. GOA-EXCUS-000-APP-29(VNT)-2021-22 dated 30.09.2021 (referred to, as the impugned order ) passed by the Commissioner (Appeals), CGST Customs, Goa. 2.1 The facts of the case, leading to this appeal, are summarised herein below: 2.2 The appellants herein, inter alia, are engaged in the manufacture and clearance of dutiable goods viz. Bottle Closures falling under Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 6 (3)(i) of the CCR, 2004, had suppressed the fact that they were availing CENVAT Credit on the input services used for the manufacture of dutiable goods as well as for the provision of exempted service of trading; moreover, they were not maintaining separate accounts for the receipts and use of input services in or in relation to the manufacture of dutiable products and exempted services as required under the provisions of Rule 6(2) of the CCR, 2004. The said fact was also not disclosed in their monthly returns filed by them with the Department. Thus, the department concluded that the appellants, being from the organized sector and working under the self-assessment regime, ought to have interpreted law correctly and accordingly availed proper CENVAT credit; and for their failure to do so the provisions of Section 11A of the Central Excise Act, 1944 read with Rule 14 of the CCR, 2004 is rightly invokable for raising demand for extended period. 3. On completion of the audit scrutiny/investigation, Show Cause cum Demand Notice No. A-II/EA/2000/G-24/C-VI/37/Guala/19-20 dated 16.01.2020 was issued to the appellants proposing as to why: (i) an amount of Rs. 43,16,337/- should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to pay/reverse the amount of CENVAT as determined by himself under the provisions of Rule 6(3) of the CCR, 2004. Therefore, the argument of the appellants that there is no provision for such disclosure in the prescribed returns is not tenable and cannot be accepted. Thus, the original authority had held that the appellants have failed to fulfil their obligations as laid down under the provisions of Rule 6 of the CCR and they are guilty of suppression of the facts as they failed to determine, disclose and reverse the amount of CENVAT under the provisions of Rule 6(3) of the CCR. Accordingly, the original authority held that the provisions of Section 11A(4) of the Central Excise Act, 1944 read with Rule 14 of the CCR for demand and recovery of CENVATamount, is rightly invoked in the matter. 4.2 As regards the quantification of the amount determined as payable, original authority had found that while calculating the amount of CENVAT amount required to be reversed by the appellants, the maximum of, either the difference between sale price and cost price of the traded goods or 10% of cost of the traded goods, should be considered as the value of the service. As per the details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der-in-Appeal dated 30.09.2021, the appellants have filed this appeal before the Tribunal. 5.1 Learned Advocate appearing for the appellants stated that in the impugned order, the learned Commissioner (Appeals) had held that they are entitled to proportionate reversal of credit under the provisions of Rule 6(3)(ii) of the CENVAT Credit Rules, 2004. The appellants had also reversed the proportionate CENVAT credit of Rs. 2,24,435/- as worked out by them taking into account the net sales on account of trading, service tax involved in such amount for the disputed period of June, 2016 to December, 2016 in the form of a worksheet provided by them. Furthermore, the appellants had also paid interest for the reversal of proportionate CENVAT credit for Rs.1,21,527/- and 15% penalty for an amount of Rs.33,665/- as such payment was made prior to the issue of show cause notice in terms of Section 11AC(1)(a) of the Central Excise Act, 1944. In addition to the above, learned Advocate submitted that trading activity is nothing but purchase and sales and is covered under sales tax law, thus it may not be considered as a service; further, as the appellants have paid the amount of CENVAT credit, alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for provision of exempted services or input service as is used in or in relation to the manufacture of exempted goods and their clearance upto the place of removal or for provision of exempted services and the credit not allowed shall be calculated and paid by the manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be: xxx xxx xxx xxx (3)(a)A manufacturer who manufactures two classes of goods, namely: (i) non-exempted goods removed; (ii) exempted goods removed; or (b) a provider of output service who provides two classes of services, namely :- (i) non-exempted services; (ii) exempted services, shall follow any one of the following options applicable to him, namely : (i) pay an amount equal to six per cent of value of the exempted goods and seven per cent of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period; or (ii) pay an amount as determined under sub-rule (3A): Provided that if any duty of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice of the securities traded, whichever is more; xxx xxx xxx xxx (3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely: (a) the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- .. (b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely:- .. (c) the manufacturer or the provider of output service shall determine the amount of CENVAT credit attributable to exempted goods removed and provision of exempted services for the whole of financial year, out of the total credit denoted as T (Annual) taken during the whole of financial year in the following manner, namely:- .. (3AA) Where a manufacturer or a provider of output service has failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of goods sold or the difference between the sale price and the cost of goods sold, whichever is higher. In this regard, it is very clear from the facts of the case, that the imported bottle closures which are sold as such, are being treated as trading activity for which the cost of the traded goods has been adopted by the authorities below as Rs.7,15,52,781/- and the corresponding sale value as Rs.7,19,38,951/-. Accordingly, the difference between the above figures being Rs. 3,86,170/- and 10% of the cost of the traded goods has been worked out as Rs.71,55,278/-, and the higher of the same has been taken into account for determination of the prescribed 7% percentage for the purpose of determining the amount required to be paid under Rule 6(3) of the CCR of 2004 as Rs.5,00,869/-. However, it is also seen at paragraph 2 of the SCN dated 16.01.2020 that the amount to be paid has been worked out on the basis of Trial Balance figures for the year 2016-17 (RUD-I) covering the period 01.04.2016 to 31.03.2017, and quantifying the demand as Rs.43,16,337/-. I find that the difference between these figures have not been examined or explained by the authorities below. 8.4 In the above back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en months for an amount of Rs.7,14,86,645/-. Further, it does not indicate that whether there was any trading or no trading in the rest of the period of the financial year 2016-17. 8.6 From careful reading of the legal provisions under clause (c) of Explanation I to Rule 6(3) of the CCR, 2004 for the purpose of determining the value in case of trading of goods and to work out the CENVAT amount to be paid, it transpires that higher of the two amounts indicated therein has to be taken as the basis for arriving at the correct amount to be paid. I further find that the amount already calculated by the appellants towards such payment also needs to be taken into account, while determining the balance amount required to be paid towards payment of CENVAT amount under Rule 6(3) of the CCR of 2004. However, the original authority had not recorded the basis on which he had dealt with the demand as proposed in the SCN and how he had taken into account the various figures as provided by the appellants. For the above reasons, the learned Commissioner (Appeals) had modified the order of the original authority for redetermination of the correct amount of CENVAT amount to be paid by the appellants, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise, Nagpur - 2002-TIOL-41-SC-CX = 1996 (81) E.L.T. 3 (S.C.) have ruled that on reversal of credit, the assessee cannot be said to have taken credit of duty on the inputs utilized in the manufacture of exempted final products. However, the appellant is liable to compensate the Government exchequer by paying the interest amount between the period of taking Cenvat credit on the common input services and actual payment of such Cenvat amount into the Central Government account. 7. In view of above, the impugned order is set aside and the appeal is allowed, to the extent it has confirmed the service tax demand and imposition of penalties on the appellant. The impugned order sustains, insofar as it has confirmed the interest demand on the appellant. However, the department should quantify the actual amount of interest payable by the appellant in terms of Paragraph 6 above. 9. In view of the foregoing discussions and analysis, I do not find any reason for interfering with that part of the impugned order at paragraphs 14(i) to 14(iii) passed by the learned Commissioner (Appeals) as it had duly taken into account the amount of CENVAT paid by the appellants along with interest and penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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