GR Power Switchgear Ltd. Vs Commissioner of Central Tax (CESTAT Hyderabad)
Summary: The Hyderabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by GR Power Switchgear Ltd. against an Order-in-Appeal dated 27.05.2019 upholding a demand of Rs.7,04,352/- under Section 11D of the Central Excise Act, 1944, along with applicable interest and penalties. The dispute related to the period 2015-16 and 2016-17. The appellant manufactured both dutiable and exempted excisable goods and cleared the exempted goods under Notification Nos. 3/2004-CE and 12/2012-CE without payment of Excise duty. Since common inputs were used and separate accounts were not maintained, the appellant complied with Rule 6(3)(a)(i) of the Cenvat Credit Rules, 2004 by reversing an amount equivalent to 6% of the value of exempted goods.
The amount was duly reversed in its books and reflected in ER-1 Returns. Under an agreement with M/s Megha Engineering & Infrastructure Ltd., the buyer agreed to reimburse the amount payable under Rule 6(3). The appellant consequently recovered the corresponding amount from the buyer. Because the invoice format contained only a column described as “Excise duty”, the reimbursement was shown under that column even though the goods were exempt from duty. During audit, the Department took the view that once the amount was collected under the description “Excise duty”, Section 11D required its deposit with the Government. The appellant argued that the amount was merely reimbursement of its statutory Rule 6(3) reversal and was never Excise duty.
