Introduction: In a recent ruling by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) in Kolkata, Neelachal Ispat Nigam Limited found itself at the center of a tax dispute. The CESTAT decision pertained to the confirmation of an amount due to the non-maintenance of separate records of inputs and input services used by the appellant in the manufacturing of both dutiable and exempted products. This article explores the intricacies of the case and the CESTAT Kolkata’s verdict.
Background of the Case: Neelachal Ispat Nigam Limited, engaged in the manufacturing of iron and steel, registered with the central excise department, availed Cenvat credit on inputs and input services. However, the company did not maintain separate accounts for inputs and input services used in the manufacture of their final products. Notably, the company produced both dutiable and exempted products, further complicating the accounting process.
Initiation of Proceedings: Due to the lack of separate accounts for inputs and input services used in the manufacturing process, the authorities invoked Rule 6(3) of the Cenvat Credit Rules, 2004. This rule mandated that the appellant pay an amount equal to 10% of the value of the exempted goods sold during the period from 2005-06 to 2007-08. This initiation of proceedings prompted the appellant to contest the show cause notice.
Appellant’s Defense: The appellant raised a defense based on an amendment introduced in 2010 through Section 73 of the Finance Act, 2010. This amendment aimed to provide relief to taxpayers. It allowed assesses to reverse Cenvat credit for inputs or input services used in the manufacture of final exempted products. However, this reversal needed to be completed within six months from May 18, 2010, and it required a certificate issued by a Chartered Accountant. Additionally, a 24% interest payment for the defaulting period was mandatory. Importantly, this amendment was given retrospective effect.
The CESTAT Kolkata Verdict: In its decision, the CESTAT Kolkata noted that the appellant had complied with the provisions of Section 73 of the Finance Act, 2010. The appellant had reversed the proportionate Cenvat credit and paid interest at a rate of 24%. Furthermore, they had filed a certificate issued by a Chartered Accountant, confirming the reversal.
The CESTAT Kolkata ruled that in light of these actions taken by the appellant, there was no basis for sustaining the demand against them. Consequently, the impugned order was set aside, and the appeal was allowed, with any consequential relief to be provided.
Conclusion: The Neelachal Ispat Nigam Limited vs. Commissioner of CGST & CX case serves as an example of the significance of timely compliance with amendments in tax laws. By adhering to the provisions of Section 73 of the Finance Act, 2010, the appellant successfully defended their position and secured a favorable decision from the CESTAT Kolkata. This case underscores the importance of staying informed about changes in tax legislation and taking proactive measures to remain compliant.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order confirming the amount on account of non-maintenance of separate records of input, input service received and availed by the appellant in manufacturing of dutiable as well as exempted products.
2. The facts of the case are that the appellant is engaged in the manufacturing activity of iron and steel and during the course of manufacturing activity, the appellant got themselves registered with the central excise department. After registration, the appellant is availing cenvat credit on input and input services and not maintaining separate account for input and input service used in manufacture of their final product. It is also fact on record that the appellant is manufacturing dutiable as well as exempted products and not maintaining separate account for input or input servicers used in manufacturing of these products. The appellant on their own volition is reversing the cenvat credit attributable to final exempted goods of input and input service used for manufacturing of the same. During the course of investigation, it was found that as the appellant is not maintaining separate account of their input, input service to be used in manufacturing of final, dutiable as well as exempted products, therefore, in terms of Rule 6(3) of the Cenvat Credit Rules, 2004, the proceedings were initiated against the appellant on account of that the appellant is not maintaining separate account of input/input services used in manufacturing of dutiable as well as exempted products, therefore, in terms of Rule 6(3) of the Cenvat Credit Rules, 2004 the appellant is required to pay an amount equal to 10% of the value of the exempted goods sold during the period 2005-06 to 2007-08. The appellant contested the show cause notice and submitted that in 2010 vide Section 73 of the Finance Act, 2010, an amendment was brought to give relief to the assesses, wherein it is incorporated that if the assessee is not maintaining separate account of input or input services used for manufacture of final dutiable as well as exempted product, then the assessee can reverse the cenvat credit for input or input services used in manufacture of final exempted products and the same is required to be done within 6(six) months from the date 18.05.2010 along with a certificate issued by the Chartered Accountant and payment of 24% of the interest for the defaulting period. The amendment was given retrospective effect. In consequent to that, the appellant reversed the cenvat credit and paid the interest @ 24% and filed a certificate issued the Chartered Accountant before the adjudicating authority and the adjudicating authority without considering the same passed the impugned order. Aggrieved from the said order, the appellant is before us.
3. Heard the parties, considered the submissions.
4. We find that in this case, it is a fact on record that the appellant in terms of section 73 of the Finance Act, 2010 has reversed proportionate cenvat credit along with interest @24% of input/input services used in the manufacture of final exempted products and also filed a certificate issued by the Chartered Accountant to that effect. In that circumstances, we hold that proportionate reversal of cenvat credit will suffice to meet the end of justice in the proceeding before us. Therefore, no demand is sustainable against the appellant. Accordingly, we set aside the impugned order and allow the appeal with consequential relief, if any.
(Dictated and pronounced in the open Court.)