Ref Cem Industries Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)
CESTAT Ahmedabad held that demand under Clause (i) of Rule 6(3) i.e. payment of 5%/10% of the value of exempted goods unjustified as appellant rightly availed the option of sub-rule (3A) of Rule 6 of CCR, 2004 i.e. reversal of proportionate cenvat credit attributed to exempted goods.
Facts- The appellant are engaged in the manufacture of branded and unbranded fire bricks. The appellant have been availing benefit of value based exemption under Notification No. 08/2003-CE dated 01.03.2002, as amended. The appellant have also been availing Cenvat credit under Cenvat Credit Rules, 2002 for the relevant period of the demand.
The department is of the view that the appellant has been availing Cenvat credit on inputs namely pet-coke, furnace oil, carbon black and calcined bauxite. These inputs are commonly used in the manufacture of both branded and un-branded fire bricks. The appellant has not maintained separate accounts of input for use in the exempted as well as dutiable final products, as required under Rule 6 of Cenvat Credit Rules, 2004, the appellant thus were asked to pay Central Excise duty at the rate of 8/10% of the value of exempted goods cleared as per the provisions of Rule 6 of the Cenvat Credit Rules, 2004. The matter got adjudicated by impugned order-in-original wherein the Adjudicating Authority has confirmed the demand of Rs. 59,24,415/- u/s. 11A(1) of the Central Excise Act, 1944 and penalty of equal amount of duty has also been imposed u/s. 11AC of Central Excise Act, 1944. The appellant is before us against the above impugned order-in-original.
Conclusion- Held that 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.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The brief facts of the matter are that the appellant are engaged in the manufacture of branded and unbranded fire bricks falling under Central Excise Tariff heading 69029010 and 69029020 of the first schedule of Central Excise Tariff Act, 1985. The appellant have been availing benefit of value based exemption under Notification No. 08/2003-CE dated 01.03.2002, as amended. The appellant have also been availing Cenvat credit under Cenvat Credit Rules, 2002 for the relevant pe-riod of the demand.
2. The Revenue entertained a view that since the appellant has been clear-ing their finished goods under the following two categories:-
(i) On payment of duty on the goods manufactured without brand name by availing exemption under Notification No.8/2003-CE dated 01.03.2003, as amended, and
(ii) Clearing the goods on payment of Central Excise duty on the branded product namely ‘ACE’ brand fire bricks.
The department is of the view that the appellant has been availing Cenvat credit on inputs namely pet-coke, furnace oil, carbon black and calcined bauxite. These inputs are com-monly used in the manufacture of both branded and un-branded fire bricks. The appellant has not maintained separate accounts of input for use in the exempted as well as dutiable final products, as re-quired under Rule 6 of Cenvat Credit Rules, 2004, the appellant thus were asked to pay Central Excise duty at the rate of 8/10% of the value of exempted goods cleared as per the provisions of Rule 6 of the Cenvat Credit Rules, 2004. The matter got adjudicated by impugned order-in-original wherein the Adju-dicating Authority has confirmed the demand of Rs. 59,24,415/- under Section 11A(1) of the Central Excise Act, 1944 and penalty of equal amount of duty has also been imposed under Section 11AC of Central Excise Act, 1944. The appellant is before us against the above impugned order-in-original.
3. Learned Advocate appearing on behalf of the appellant contended that a simple issue involved in the matter is that the appellant have availed credit on the common inputs of pet-coke, furnace oil, and Rotary Kiln Bauxite. It has been contended by the learned Advocate that they have submitted Chartered Engineer certificate in this regard and the department without verifying the fact whether all the inputs have been used commonly for both the dutiable and duty free product have issued a show cause notice without verification of goods. The learned Advocate has submitted that Ad-judicating Authority has failed to take into account the Chartered Engineer certificate dated 01.08.2009 issued by Shri P.P. Bhadresa wherein the learned Chartered Engineer, after visiting the factory premises and verifying the manufacturing process had certified the consumption of pet-coke for different types of bricks. The appellant are relying on this certificate for consumption of fuel/ pet-coke, on clearance in-voices and analysis of the data of clearances of unbranded and branded goods was submitted with the submissions to show cause notice and has claimed that more than proportionate credit has already been reversed back by the appellant and they have also paid the interest on the same.
4. Learned Advocate has relied upon various judgments in this regard which are given below:-
(a) Tamilnadu News Print and Papers Limited – 2009 (241) ELT 82
(b) Savita Polymers Limited – 2009 (240) ELT 616
(c) Ballarpur Industries Limited – 2006 (199) ELT 433
(d) ESAB India Ltd. 2009 (243) ELT 429
(e) Maize Products 2009 (234) ELT 431
(f) Nicholas Piramal (I) Limited – 2008 (232) ELT 37
(g) Chandrapur Magnet Wires Pvt Limited – 1996 (81) ELT 3
(h) Nestle India Limited -2010 (250) ELT 341
(i) Bombay Minerals Limited – 2019 (29) G.S.T.L. 361
(j) Goyal Proteins Limited – 2017 (355) ELT 72 con-firmed by SC 2017(355) ELT A27
(k) Foods, Fats Fertilizers Limited – 2009 (247) ELT 209
(l) Uniworth Textiles Limited – 2013 (288) E.L.T. 161 (S.C.)
(m) Polycab Wires Pvt. Limited -2018 (360) ELT 391 (Bom.)
(n) Sterlite Telelink Limited – 2014 (312) ELT 353 (Tri. – Ahmd.)
5. We have also heard the learned DR who has reiterated the findings giv-en in the impugned order-in-original.
6. Having heard both the sides, we take note of the fact of Para 28 of the order-in-original whereunder the details of reversal of Cenvat credit has been provided and the same is reproduced below:-
“28. I therefore find that the noticee has in clear and blatant violation of Rule 6 Cenvat Credit Rules.2002 which were later on rescinded/superseded by Cen-vat Credit Rules, 2004 took
(i) Cenvat credit on common inputs used in both duti-able as well as exempted goods.
(ii) did not maintain separate records.
(iii) did not pay amount equal to 8%/10% on the value of exempted goods cleared.
The Central Excise law did not permit the noticee to take Cenvat credit on inputs use in manufacture of exempted goods. If the inputs were used in both du-tiable an exempted goods, provision of Rule 6 of Cenvat Credit Rules were there but the noticee did not choose to comply those provisions. When the records of the noticee were audited by the Central Excise auditors, the violation of Rule 6 came to the notice of the department and the noticee paid up the amount as can be seen from the calculation sheet submitted by the noticee under the cover of letter Ref: VBS/C.Ex./General/0114/2012-2013 dated 04.02.2013. The summary of the reversal made by the no-ticee given in the calculation sheet is as under :-
DETAILS OF DUTY PAYMENT
