Emami Limited Vs C.C.E & S.T.-Valsad (CESTAT Ahmedabad)
CESTAT Ahmedabad held that appellant is not liable to pay an amount equal to 10%/6%/5% of the value of exempted goods as proportionate Cenvat credit on common input service attributed to the exempted final product already reversed.
Facts- The appellant are engaged in the manufacture of dutiable as well as exempted goods. They are availing Cenvat credit in respect of input and input services. There are certain common services such as management consultant services, Chartered Accountant services, financial and accounting services, etc. are availed by the head office of the appellant, which is attributed to both dutiable and exempted goods. During audit it was observed that the appellant are engaged in the manufacture of dutiable as well as exempted goods from April-2009 to March- 2013 wherein exempted goods to the tune of Rs. 43,02,50,793/- were manufactured and sold.
It was further observed that the appellant had availed the Cenvat credit of input services to the amount of Rs. 56,52,957/- based on invoices issued by its head office as an ISD on services like management consultancy, CA service, etc. which were commonly used for dutiable as well as exempted goods. Thus it was observed that the appellant should reverse Cenvat credit availed on such common input/ input services based on ratio of exempted goods manufactured.
As directed, the appellant in the months of May 2013 and July 2013 reversed the proportionate Cenvat credit of Rs. 30,68,062/- along with payment of interest of Rs. 8,01,333/- thereafter the appellant filed an intimation submitting the payment details for reversal of credit and requesting the commissioner to close the audit objection and not to issue any show cause notice for imposing penalty. However, the department issued a letter dated 19.09.2013 directing the appellants to pay penalty under the provisions of Section 11A (5) for irregular availment of Cenvat credit of common input service for dutiable as well as exempted goods.
Subsequently, show cause notice was issued proposing demand of Rs. 2,39,37,225/- i.e. 10%/6%/5% of the value of the exempted goods cleared during the relevant period. The said demand was confirmed. Being aggrieved, the present appeal is filed.
Conclusion- Held that in a case where assessee avails the Cenvat credit on common input service and the same is used for exempted as well as dutiable goods and even at a later stage the assessee reverse the proportionate credit with payment of interest, if there is any delay in reversal of such credit the demand of 10%/6%/5% shall not sustain. Therefore, we are of the considered view that the appellant are not liable for payment of an amount equal to 10%/6%/5% of the value of the exempted goods. Hence the same is set aside. However, the reversal of the proportionate credit along with interest paid by the appellant is correct and the same is maintained.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The appeal as well as early hearing application is listed today. It is observed that the appeal itself has come up for hearing in routine course. therefore, the early hearing application became infructuous and disposed of accordingly.
1.1 As regard the appeal, the brief facts of the case are that the appellant are engaged in the manufacture of dutiable as well as exempted goods. They are availing Cenvat credit in respect of input and input services. There are certain common services such as management consultant services, Chartered Accountant services, financial and accounting services, etc. are availed by the head office of the appellant, which is attributed to both dutiable and exempted goods. During audit in the month of March 2013 to June 2013, it was observed that the appellant are engaged in the manufacture of dutiable as well as exempted goods from April-2009 to March- 2013 wherein exempted goods to the tune of Rs. 43,02,50,793/-were manufactured and sold.
1.2 It was further observed that the appellant had availed the Cenvat credit of input services to the amount of Rs. 56,52,957/- based on invoices issued by its head office as an ISD on services like management consultancy, CA service, etc. which were commonly used for dutiable as well as exempted goods. Thus it was observed by the audit officers that the appellant should reverse Cenvat credit availed on such common input/ input services based on ratio of exempted goods manufactured. Accordingly, the appellant were directed to reverse proportionate Cenvat credit of Rs 30,68,062/- within 10 days by letter dated 26.04.2013. Based on the said audit objection, the appellant in the months of May 2013 and July 2013 reversed the proportionate Cenvat credit of Rs. 30,68,062/- along with payment of interest of Rs. 8,01,333/- thereafter the appellant filed an intimation in terms of Section 11A (2B) of the Central Excise Act 1944 in form Annexure S dated 20.07.2013 submitting the payment details for reversal of credit of Rs. 30,68,062/- and interest of Rs. 8,01,333/- and requesting the commissioner to close the audit objection and not to issue any show cause notice for imposing penalty. However, the department issued a letter dated 19.09.2013 directing the appellants to pay penalty under the provisions of Section 11A (5) of the Central Excise Act 1944, for irregular availment of Cenvat credit of common input service for dutiable as well as exempted goods.
1.3 In the letter dated 19.09.2013 of the department, it is also observed that the appellants have already paid the duty amount and interest. Details are reproduce below:
