Jindal Photo Vs C.C.E. & S.T. (CESTAT Ahmedabad)
CESTAT held that in case of any dutiable goods became exempted, the assessee is required to reverse the cenvat credit in respect of inputs lying in stock or in process or is contained in the final product as of date of opting for the exemption notification. In terms of above specific provision, the appellant is required to reverse the credit attributed to inputs as such, in process, contained in finished gods, therefore, the appellant have mistakenly reversed 5% in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004. On realising this mistake they have reversed Rs. 5,41,069/- on the input, in process, and contained in the finished goods by following the Rule 11(3) they have corrected the mistake, therefore, the amount @ 5% of exempted finished goods reversed by the appellant became excess reversal, hence the same is liable to be recredited/ refunded to the appellant.
The contention of both the lower authorities as well as the submission of the learned Authorized Representative is that once the option of Rule 6(3)(i) is availed, the same cannot be withdrawn. In this regard, I find that as per the specific provision particularly in a case that the goods which were earlier dutiable and at interim stage became exempted, the provision which predominantly apply is Rule 11(3) of Cenvat Credit Rules, 2004. According to which the appellant is required to reverse the cenvat credit attributed to the input, in process and/ or contained in finished goods. The appellant have made good even though at a later stage by reversing the amount of Rs. 5,40,069/- therefore, the reversal of 5% made by the appellant is an excess reversal which need to be recredit/ refunded to the appellant. The Circular relied upon by the Learned Authorized Representative shall not be applicable in the facts of the present case as the appellant were required to reverse the cenvat credit in terms of Rule 11(3) of Cenvat Credit Rules, 2004. The Circular applicable only in a case where the assessee availed option of Rule 6(3)(i) at the time when the appellant are manufacturing both the category of goods i.e. dutiable and exempted. In the present case, the fact is different inasmuch as the dutiable goods became exempted for which Rule 11(3) is applicable, therefore, the Circular in the peculiar facts of the present case is not applicable. Moreover, in catena of decision, it was held that giving options for availing a particular option is procedural requirement and on failure of the same, the assessee cannot be deprived of choosing any of the option available in Rule 6(3) and one of the option is reversal of proportionate credit. For this reason also, the appellant’s excess reversal of Rs. 3,24,664/- required to be refunded/recredit.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The facts in brief are that the appellant are engaged in the manufacture of photographic paper, X-ray and Colour Roll films falling under chapter 37. Their final product viz. Colour Positive unexposed cinematographic film and roll was exempted from whole of excise duty vide Notification No.33/2011-CE dated 25.06.2011. The appellant reversed cenvat credit of Rs. 3,24,664/- vide entry No.491/492/495/496 dated 27.06.2011 from their RG 23A Part II account towards amount equal to 5% of the value of the exempted clearances made on 27.06.2011, in terms of Rule 6(3)(i) of CCR. Subsequently, the appellant reversed total amount of duty of Rs. 5,41,069/- vide entry No. 525/524 dated 01.07.2011 from their R.G.23A part II account against the raw material in their stock and chose the second option of non-payment of duty and to maintain separate account as provided in Rule 6 of CCR. The appellant filed an application before the Deputy Commissioner seeking permission to retake credit of wrongly reversed said amount of Rs. 3,24664/-. In the department’s view, the amount of Rs.3,24,664/- was correctly reversed under Rule 6 (3) of CCR as the option once exercised to reverse amount in terms of Rule 6 cannot be changed during the financial year. Therefore a Show Cause Notice was issued to the appellant and after due process of law, the Adjudicating Authority, vide the order dated 31.08.2012, has rejected the application and declined permission for re-credit/refund.
1.2 Being aggrieved by the order-in-original dated 31.08.2012, the appellant filed an appeal before Commissioner (Appeals), who concurring with the views taken by the adjudicating authority upheld the order-in-original and rejected the appeal. Therefore, the present appeal.
2. Shri J. Surti, learned counsel appearing on behalf of the appellant submits that though the appellant have reversed 5% immediately after the Notification No.33/2011-CE dated 25.06.2011 exempted the product namely ‘Colour Positive Unexposed Cinematographic Film’ they mistakenly reverse 5% of the value of exempted clearances made on 27.06.2011 in terms of Rule 6(3)(i) of Cenvat Credit Rules, however, the correct procedure was to reverse the cenvat credit attributed on the inputs, WIP and finished goods lying in stock on date of exemption notification in terms of Rule 11 of Cenvat Credit Rules-2004. The appellant complying the said rule, reversed the cenvat credit of Rs. 5,41,069/- on the stock of exempted goods lying on 25.06.2011 which also includes the clearances made on 27.06.2011, therefore, the reversal made in terms of Rule 6 was rightly liable to be recredit/ refunded. Therefore, the order-in-original as well as order-in-appeal are incorrect and illegal which need to be set aside and appeal be allowed.
3. Shri R.K. Agarwal, Learned Superintendent (Authorized Representative) appearing on behalf of the Revenue reiterates the findings of the impugned order. He also relied on the Board Circular No. 868/6/2008-CX dated 09.05.2008 and submitted that once the assessee availed the option under Rule 6(3), the same cannot be withdrawn during the said financial year, therefore, the appellant first reversed the amount of 5% in terms of Rule 6(3), the same cannot be allowed to be recridt/ refunded.
4. I have carefully considered the submissions made by both the sides and perused the records.
5. I find that the appellant the fact is not under dispute that the appellant’s products namely, ‘Colour Positive Unexposed Cinematographic Film’ became exempted vide Notification No.33/2011-CE dated 25.06.2011. In case of goods became exempted for the purpose of cenvat, the procedure prescribed under Rule 11(3) need to be followed which is reproduced below:
Rule 11(3) : The CENVAT credit in respect of input purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input was supplied from the stock on which duty was paid by the producer of such input and only an amount of such duty on pro rata basis has been indicated in the invoice issued by him :
Provided that provisions of this sub-rule shall apply mutatis mutandis to an importer who issues an invoice on which CENVAT credit can be taken.
From the above provision, it is clear that in case of any dutiable goods became exempted, the assessee is required to reverse the cenvat credit in respect of inputs lying in stock or in process or is contained in the final product as of date of opting for the exemption notification. In terms of above specific provision, the appellant is required to reverse the credit attributed to inputs as such, in process, contained in finished gods, therefore, the appellant have mistakenly reversed 5% in terms of Rule 6(3)(i) of Cenvat Credit Rules, 2004. On realising this mistake they have reversed Rs. 5,41,069/- on the input, in process, and contained in the finished goods by following the Rule 11(3) they have corrected the mistake, therefore, the amount @ 5% of exempted finished goods reversed by the appellant became excess reversal, hence the same is liable to be recredited/ refunded to the appellant. The contention of both the lower authorities as well as the submission of the learned Authorized Representative is that once the option of Rule 6(3)(i) is availed, the same cannot be withdrawn. In this regard, I find that as per the specific provision particularly in a case that the goods which were earlier dutiable and at interim stage became exempted, the provision which predominantly apply is Rule 11(3) of Cenvat Credit Rules, 2004. According to which the appellant is required to reverse the cenvat credit attributed to the input, in process and/ or contained in finished goods. The appellant have made good even though at a later stage by reversing the amount of Rs. 5,40,069/- therefore, the reversal of 5% made by the appellant is an excess reversal which need to be recredit/ refunded to the appellant. The Circular relied upon by the Learned Authorized Representative shall not be applicable in the facts of the present case as the appellant were required to reverse the cenvat credit in terms of Rule 11(3) of Cenvat Credit Rules, 2004. The Circular applicable only in a case where the assessee availed option of Rule 6(3)(i) at the time when the appellant are manufacturing both the category of goods i.e. dutiable and exempted. In the present case, the fact is different inasmuch as the dutiable goods became exempted for which Rule 11(3) is applicable, therefore, the Circular in the peculiar facts of the present case is not applicable. Moreover, in catena of decision, it was held that giving options for availing a particular option is procedural requirement and on failure of the same, the assessee cannot be deprived of choosing any of the option available in Rule 6(3) and one of the option is reversal of proportionate credit. For this reason also, the appellant’s excess reversal of Rs. 3,24,664/- required to be refunded/recredit.
6. In view of my above observation, I am of the considered view that the appellant is entitled for recredit/ refund of Rs. 3,24,664/- and interest thereupon, if any, as per law. Accordingly, the impugned order is set aside. Appeal is allowed with consequential relief.
(Pronounced in the open court on 23.01.2023)
