CX - Retrospective amendment of Rule 6 - Common input services used for dutiable and exempted final products - since appellant did not reverse proportionate CENVAT credit within six months of enactment of FA 2010, they cannot claim benefit of retrospective legislation: CESTAT
By TIOL News Service
MUMBAI, NOV 26, 2012: THE appellant are manufacturers of exempted as well as dutiable goods and availed CENVAT. During the course of audit of their records, it was noticed that the appellant did not maintain separate accounts as required under Rule 6 (2) of the CENVAT Credit Rules, 2004 in respect of common inputs service used in the manufacture of exempted products as well as dutiable products. Therefore, two show-cause notices were issued for recovery of a sum of Rs, 7,77,691/- equivalent to 10% of the total price of the exempted goods under Rule 6 (3) of the CENVAT Credit Rules, 2004 along with a proposal for imposition of interest and penalty.
The notice was adjudicated and the impugned demands were confirmed and a penalty of Rs. 20,000/- (Rs. 10,000/- in each case) was imposed on the appellant.
Since the appellant was not successful before the lower appellate authority, they are before the CESTAT.
The appellant submitted that it is a fact that they had not maintained separate records on the input service used in or in relation to the manufacture of exempted and dutiable final products during the impugned period from 2006-07 to 2008-09 and that they had taken Input Service credit of Rs, 5,77,463/- out of which that attributable to the dutiable product works out to Rs, 5,45,065/- and the amount of credit attributable to exempted goods is only Rs. 32,398/-. However, they have been asked to pay a sum of Rs, 7,77,691/- being 10% of the price of the exempted goods cleared and which is improper in view of the Gujarat High Court decision in Shree Rama Multi tech Ltd., - 2011-TIOL-946-HC-AHM-CX wherein in a similar situation the appellant was allowed to reverse proportionate credit in view of the retrospective amendment made to CENVAT Credit Rules, by Finance Act, 2010.
The Revenue representative submitted that even after the retrospective amendment to by Finance Act, 2010, the appellant neither made an application for reversal of proportionate credit nor reversed the proportionate credit which should have been done with six months from the date of enactment of Finance Act, 2010. Inasmuch as since the same was not done within the period specified, the appellant cannot now plead that they would reverse the proportionate CENVAT Credit.
The Single Member Bench after hearing both sides observed -
"5.2 The undisputed facts in this case are that the appellant availed input service tax credit in respect of both dutiable as well as exempted final products and did not maintain separate accounts with respect to the such availment. Therefore, as per the provisions of Rule 6 (3) of the CENVAT Credit Rules, they were required to pay an amount equivalent to 10% of the value of the exempted goods cleared. Therefore, the confirmation of demand in their regard along with interest thereon cannot be faulted.5.3 As regards the decision of the Hon'ble High Court of Gujarat in the case of Shree Rama Multi Tech Ltd. (supra), in that case the appellant therein had reversed the proportionate credit at the time of clearance of the goods, though the same was not provided for in Rule 57CC of the CENVAT Credit Rules at the relevant time. However, in view of the retrospective amendment by Section 69 of the Finance Act, 2010, they became entitled for such a facility. The appellant was pursuing an alternate remedy and did not make any application as provided for under Section 69. In that context, the Hon'ble High Court held that the appellant be permitted to file an application for regularization of the credit taken.5.4 In the case before me the facts are completely different. The appellant herein has not reversed proportionate credit attributable to exempted goods at the time of clearance of the exempted goods nor have they sought to regularize the same even after the enactment of Finance Act, 2010 within the time period stipulated therein. Section 69 of the Finance Act, 2010 specifically provided that the person who was availed the credit wrongly, should opt for the facility specified therein and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or Cost Accountant certifying the input credit attributable to the inputs used in or in relation to the manufacture of final products, which are exempted from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty within a period of six months from the date on which the Finance Bill 2010 receives the assent of the President. On such application, the Commissioner of Central Excise can call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard. It may be seen that specific time limits have been prescribed in the Finance Act, 2010 for regularization of the CENVAT Credit wrongly taken. The appellant herein has not followed the procedure prescribed nor have they reversed the CENVAT credit. This Tribunal being a creation of the statute cannot over look or condone the time limits specified in the statute. Therefore, I am of the view that the benefit of decision of the Hon'ble High Court of Gujarat in the Shree Rama Multi Tech Ltd., case cited supra cannot be granted to the appellant at this juncture. Inasmuch as the time limit expired in November 2010 itself and the appellant herein did not comply with the conditions stipulated therein, I hold that the order passed by the lower authorities cannot be faulted. The only relief that can be given to the appellant is with regard to the penalties imposed. Since there is no intention to evade any duty and taking into account the facts and circumstances of the case, I set aside the penalties imposed on the appellant. But for the above modification, the order of the lower appellate authority is upheld and the appeal is dismissed."
In passing:- See Division Bench decisions in -
+ Meghdoot Chemicals Ltd. - (2012-TIOL-1181-CESTAT-MUM)+ Rochem Separation Systems (I) Pvt. Ltd. - (2012-TIOl-1064-CESTAT-MUM)
