Hindustan Colas Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
CESTAT Kolkata held that provisions of rule 6(3) of the CENVAT Credit Rules, 2004 is not applicable when CENVAT Credit attributable to non-excisable goods not availed. Accordingly, demand set aside.
Facts- The Appellant, M/s. Hindustan Colas Pvt. Ltd, manufactures dutiable/ excisable goods such as bitumen emulsion, road bond emulsion etc. The Appellant also produces non excisable products like Crumb Rubber Modified Bitumen (“CRMB”) and Polymer Modified Bitumen (“PMB”).
During the period FY 2013 – 2014 to FY 2017 – 2018 (till June 2017), the Appellant used common inputs (Bitumen VG10, Bitumen VG 30 etc.) and input services (manpower recruitment, legal consultancy, GTA, rent-a-cab, security, courier etc.) for manufacture of dutiable goods as well as for production of non-excisable goods like CRMB and PMB.
For the period up to June 2013, the Appellant availed CENVAT credit and subsequently reversed the credit availed on common input and input services used for production of non-excisable goods in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 and such reversal was shown by the Appellant in its ER-1 returns.
During the course of audit, a spot memo was issued to the Appellant stating that production of CRMB and PMB does not tantamount to “manufacture” therefore, the Appellant should not have availed the CENVAT credit of duty paid on common input and input services used for making CRMB and PMB at the very first instance.
The department issued a Show Cause Notice to the Appellant demanding differential duty of CENVAT credit amounting to Rs. 8,22,43,578/- under Rule 14 of the CENVAT Credit Rules, 2004, along with interest and penalty. The Commissioner confirmed the demand. Being aggrieved, the present appeal is filed.
Conclusion- Held that the Commissioner has not given any reason for rejecting the CA certificate. On the other hand the practice of reversal of credit adopted by the Appellant through their SAP system clearly substantiate their claim that they have not availed the Cenvat credit of common inputs used in the production of non excisable goods that the initial stage itself . They have also reversed the proportionate credit on common input services and indicated in the ER-1 returns. We have no reason to doubt the CA certificate issued in this regard. Rule 6(3) of the CENVAT Credit Rules, 2004 is applicable when Cenvat credit is availed on dutiable and exempted goods and separate records are not maintained. In this case, the Cenvat credit attributable to non-excisable goods are not availed at the initial stage itself. Thus, we hold that Rule 6(3) of the CCR, 2004 is not applicable in this case.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeal has been filed against the Order-in-Original dated 19.05.2021 passed by Commissioner of CGST & C.EX., Haldia. In the impugned order, the Commissioner has confirmed the demand of Rs. 8,22,43,578/-, along with interest and equal amount of tax as penalty.
2. Briefly stated facts of the case are that the Appellant, M/s. Hindustan Colas Pvt. Ltd, manufactures dutiable/ excisable goods such as bitumen emulsion, road bond emulsion etc. The Appellant also produces non excisable products like Crumb Rubber Modified Bitumen (“CRMB”) and Polymer Modified Bitumen (“PMB”). During the period FY 2013 – 2014 to FY 2017 – 2018 (till June 2017), the Appellant used common inputs (Bitumen VG10, Bitumen VG 30 etc.) and input services (manpower recruitment, legal consultancy, GTA, rent-a-cab, security, courier etc.) for manufacture of dutiable goods as well as for production of non-excisable goods like CRMB and PMB.
3. For the period up to June 2013, the Appellant availed CENVAT credit and subsequently reversed the credit availed on common input and input services used for production of non-excisable goods in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 and such reversal was shown by the Appellant in its ER-1 returns. However, during the course of audit, a spot-memo dated 26.07.2013 was issued to the Appellant stating that production of CRMB and PMB does not tantamount to “manufacture” in terms of Section 2(f) of the Central Excise Act, 1944 in view of Supreme Court’s decision in the case of CCE, Bangalore vs. Osnar Chemicals Pvt. Ltd., 2012 (276) ELT 162 (SC), therefore, the Appellant should not have availed the CENVAT credit of duty paid on common input and input services used for making CRMB and PMB at the very first instance. It was further stated that availing and reversal thereof in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 was not correct since Rule 6 is applicable only to non-excisable goods and CRMB and PMB do not fall within the definition of exempted goods. Accepting the Audit objection, the Appellant informed the department vide their letter dated 09.10.2013 that as per their SAP system each time any common input was used for production of CRMB and PMP, proportionate CENVAT credit was automatically computed for reversal. They further informed that for the period up to June 2013, the credit reversed on common inputs was shown in the ER-1 returns, due to the objection raised vide the spot memo, from July 2013 onwards, they have started availing only the net CENVAT credit on inputs (viz. total credit on inputs less common credit attributable to production of CRMB and PMB) in their ER-1 returns. However, as regards the common input services, they continued to show the total credit availed as well as reversals made in ER-1 returns.
4. The department issued a Show Cause Notice to the Appellant demanding differential duty of CENVAT credit amounting to Rs. 8,22,43,578/- under Rule 14 of the CENVAT Credit Rules, 2004, along with interest and penalty. In the Notice it has been alleged that the Appellant has not maintained separate records/accounts as per Rule 6(2) of the CENVAT Credit Rules, 2004 and has incorrectly availed CENVAT credit of the duty paid on common inputs and input services utilized in making non-excisable goods such CRMB and PMB. Accordingly, in terms of Rule 6(3)(ii) read with Rule 6(3A) of the CENVAT Credit Rules, 2004 CENVAT Credit amounting to Rs. 10,08,60,693/- was attributable to production of CRMB and PMB (non-excisable goods). The Appellant’s claim regarding non-availment of CENVAT credit on common inputs was found to be not correct and as per ER-1 returns filed for the aforesaid period it was found that the Appellant had only reversed Rs. 1,86,17,115/-. The Notice was adjudicated by the Commissioner, Haldia vide the impugned order wherein he confirmed the demands made in the Notice on the ground that the fact of reversal/non-availment of credit is not evident from any official record including the ER-1 return of the Appellant and details of SAP software being private records of the Appellant cannot be accepted. Further, the Appellant had submitted a CA certificate from M/s Ford Rhodes Parks and Co LLP certifying that they have not availed credit on inputs and reversed credit on input services. However, the Commissioner has not accepted the Certificated issued by the CA. Being aggrieved with such O-I-O, the Appellant has filed the present appeal.
5. The Appellant submits that they have not availed the amount of CENVAT credit demanded in the impugned order. The amount of CENVAT credit not availed on common inputs used towards production of non-excisable goods is more than amount of CENVAT credit The details regarding such non-availment of CENVAT credit of duty paid on common input used for the purpose of production of CRMB and PMB is as follows:
