Commissioner of Central Excise & ST Vs Galaxy Diesel (CESTAT Ahmedabad)
In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Ahmedabad dismissed an appeal by the Revenue in the case of Commissioner of Central Excise & ST Vs Galaxy Diesel. The core issue was whether the respondent was liable to pay 8%/6%/5% of the value of an exempted service after they had paid back the full amount attributed to the exempted service along with interest.
In this case, the Revenue argued that the respondent should pay a percentage of the value of the exempted service, as separate accounts had not been maintained for the input service used for the exempted goods. The Revenue referred to Rule 6(3) of the Cenvat Credit Rules, 2004, as the foundation for its claim.
However, the CESTAT Ahmedabad disagreed, finding that the respondent’s payment of the entire Cenvat credit, along with interest, eliminated the need to pay additional amounts under Rule 6(3). This ruling is in line with various court and tribunal decisions. These rulings state that once the Cenvat credit for common inputs related to an exempted service is reversed with interest, any demand under Rule 6(3) will not be valid. The Tribunal also cited various judgements to support its decision.
Conclusion: The dismissal of the Revenue’s appeal by CESTAT Ahmedabad in the Commissioner of Central Excise & ST Vs Galaxy Diesel case reinforces the principle that repayment of the entire Cenvat credit along with interest negates additional demands under Rule 6(3) of the Cenvat Credit Rules, 2004. This decision is significant for tax law, as it reaffirms the principle that if a Cenvat credit availed is subsequently reversed along with interest, no additional charges should be applicable.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal is filed by the Revenue against the adjudication order passed by Commissioner, Central Excise Rajkot. As per the grounds of appeal even though the respondent had paid back the full amount attributed to exempted service along with interest, they are liable to pay 8%/6%/5% of the value of exempted service for the reason that respondent have not maintained separate accounts.
2. Shri Prabhat K. Rameshwaram, learned Addl. Commissioner (AR) appearing on behalf of the Revenue submits that since the respondent have not maintained separate account in respect of input service used for exempted goods, there is no option except to pay the amount at the rate of 8%/6%/5% in terms of Rule 6(3) of Cenvat Credit Rules, 2004. He also placed reliance on the Bombay High Court judgment in the case of CCE, Thane-1 vs. Nicholas Piramal (India) Limited – 2009 (244) ELT 321 (Bom.).
3. None appeared on behalf of the respondent.
4. We have carefully considered the submissions made by learned AR and perused the record. We find that the Revenue’s case is that even though the respondent have admittedly paid back the entire Cenvat credit availed along with interest which was partly attributed to exempted service even then the respondent is liable to pay 8%/6%/5% amount of value of exempted services in terms of Rule 6(3) of Cenvat Credit Rules, 2004. We find that on this issue much water has been flown and in various cases, the Courts and Tribunal held that once the Cenvat credit of the common inputs used in relation to exempted service is reversed along with interest, the demand of 8%/6%/5% in terms of Rule 6(3) will not sustain. The Commissioner has also taken support from one of the land mark judgment in the case of Chandrapur Magnet Wires Pvt. Limited vs. CCE, Nagpur – 1996 (81) ELT 3 (SC) wherein it was held that even though the modvat credit was availed but subsequently the same is reversed along with interest situation become as if no Cenvat credit is availed. Accordingly the benefit of notification was Some of the judgments wherein the similar issue has been decided in favour of the respondent are cited below:-
(a) Mercedes Benz India (P) Limited vs. CCE Pune-1 – 2015 (40) STR 381 (Tri. Mum.)
(b) Hello Minerals Water (P) Limited vs. UOI – 2004 (174) ELT 422 (All.)
(c) Kundan Cars Pvt. Limited vs. CCE, Pune – 2016 (43) S.T.R. 630 (Tri. – Mumbai)
(d) Bombay Minerals Limited vs. CCE & ST, Rajkot – 2019 (29) GSTL 361 (Tri. – Ahmd.)
5. As regards the judgments relied by learned AR, we find that the judgment has been subsequently distinguished, therefore, the same is not applicable.
6. In view of the discussions made hereinabove and the judgments cited, the demand of 8%/6%/5% cannot be made in the facts of the present case when the respondent has admittedly paid back the entire Cenvat credit along with interest which was partly attributed to exempted service. Therefore, the demand is not sustainable. Hence the impugned order is upheld and the Revenue’s appeal is dismissed.
(Pronounced in the open court on 19.06.2023)
