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PJ/Case Law/2013-14/1725

Whether assessee reversing 8% of exempted value for first two months be allowed to opt for proportionate reversal in the same financial year?

Case:- TATA STEEL LTD VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, JAMSHEDPUR

Citation:-2013-TIOL-1287-CESTAT-KOL

Brief Facts:-This is an application filed seeking waiver of pre-deposit of CENVAT Credit of Rs.4.35 crores and equal amount of penalty imposed under Rule 15 (2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.

Narrating the facts, in brief, the Ld. Sr. Advocate Dr. Chakraborty has submitted that the applicants are engaged in the manufacture of finished goods viz. Coke. In the manufacture of the said finished goods, various inputs were used on which they avail CENVAT credit. Further, he has submitted that in the process of manufacture of said finished goods, exempted products viz. Coal Tar and coke oven gas also emerge. The Ld. Advocate submitted that since the applicants were not able to maintain separate accounts of the inputs used in or in relation to the manufacture of dutiable products i.e. coke and exempted products viz. Coal Tar and Coke Oven Gas, they have been paying 8%/10% of the price of the exempted goods as per sub-rule (3) of Rule (6) of Cenvat Credit rules, 2004.

Appellant’s Contention:-The Appellant submitted that w.e.f. 01.04.2008, the said Rule 6 of CCR, 2004 has been amended, and under clause (i), the earlier position has been continued. But, under Clause (ii), the assessee is given an option to pay an amount equal to the Cenvat Credit attributable to the input and input services used in or in relation to the manufacture of exempted finished goods by following the procedure prescribed under Sub-rule (3A) of said Rule 6 CCR, 2004. It is his contention that the relevant data relating to the Cenvat credit, attributable to the inputs used in the exempted products were not readily available with the applicant as on 1/4/2008, hence, they could not exercise their option at the beginning of the Financial year. However, after collecting the necessary data, on 29/5/2008, the applicant wrote a letter to the Range Superintendent exercising their option as laid down under sub-rule 3(A) of Rule 6 of Cenvat Credit Rules, 2004. The Ld. Sr. Advocate further submitted that the said request was rejected by the Department on 5th of June, 2008. The ld. Advocate further submitted that merely because in the initial two months, they have paid 10% of the price of the exempted goods, it could not be construed that they have exercised option to discharge their obligation under clause (i) of sub-rule (3) of Rule 6 of Cenvat Credit rules, 2004. In support, he has referred to the judgment of the Larger Bench in the case of Ankit Packaging Ltd. Vs. Commr. of Central Excise, Hyderabad-2004 (165) E.L.T. 228 (Tri. -LB) = (2004-TIOL-54-CESTAT-DEL-LB).

Respondent’s Contention:-The Respondent has submitted that Sub Rule (3) of Rule 6 of CCR, 2004 is specific, in the sense that the applicant is required to follow either of the procedure i.e clause (i) or (ii) as laid down under the said Rule. It is his submission that if a procedure has been followed, the same cannot be abruptly changed, in the same financial year, in view of the Explanation-I to clause (ii) to sub-rule 3 of said Rule 6 of CCR, 2004. In the instant case by choosing to discharge 8%/10% of the price of the exempted products at the beginning of the Financial year, the Applicant had exercised their option under clause (i) and hence they should not be allowed to change during the same financial year. The Ld. Special Counsel also submitted that even if there is a strong prima facie case in favour of the applicant, in view of the principles of law laid down for disposal of the stay petitions in view of the principles laid down in a number of cases including in M/s. Benera Valves Vs. Commr. of Central Excise-2008 (012) STR 0104 (SC) = (2006-TIOL-156-SC) and the recent case of Mayo College General Council Vs. Commr. of C.Ex. (Appeals), Jaipur-II- 2012 (28) S.T.R. 225 (Raj.) = (2012-TIOL-878­HC-RAJ-ST] and the judgment in the case of Commr. of Central Excise, Guntur Vs. Sri Chaitanya Educational Committee-2011 (22) STR 135 (AP) = (2011-TIOL-147-HC-AP-ST), the applicant be directed to deposit from the confirmed amount to safeguard the interest of Revenue.

Reasoning of Judgment:-We find that the limited issue involved in the present case is availing of the benefits of procedures laid down under clause (i) or Clause (ii) of the amended Sub-Rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 brought into force w.e.f. 01/4/2008. It is the case of the Revenue that once the assessee continues to pay 10% of the price of the exempted goods at the beginning of the Financial year, without exercising option to reverse proportionate credit under clause (ii) of Sub-Rule (3) of Rule 6 of CCR, 2004, then, in the same financial year, he cannot be allowed to resort to clause(ii) of Sub-Rule (3) of Rule 6 of CCR, 2004. The contention of the applicant is that since they have not exercised any option for availing the benefit under Sub-Rule (i), but paid 8%/10% of the price of the exempted goods due to non-availability of data, they cannot be precluded in exercising their option under Clause (ii) during the same financial year in view of the judgment of the Larger Bench's decision in the case of Ankit Packaging Ltd. (supra). Undisputedly, the applicant has made a request to the Department seeking permission to exercise their option under Clause (ii) of Sub-Rule (3) of Rule 6 of CCR, 2004 on 29th May, 2008. Also, we find that to exercise option under Sub-Rule (ii), mere exercise of such option is not enough but the conditions/procedure laid down under Sub-rule 3 (A) of said Rule 6 is required to be followed by furnishing the details mentioned therein. Prima facie, in the present case, we find that after availability of necessary data necessary to exercise option under clause (ii), the applicant, made an application on 29th of May, 2008 complying with the conditions prescribed under Sub-Rule 3A. In view of the decision of the Larger Bench in Ankit Packaging case (Supra), prima facie, we are of the opinion that mere discharging 10% of the price of the exempted goods due to non-availability of data at the beginning of the Financial year, would not disentitle them in exercising their option later during the same financial year under clause (ii) of Sub-Rule (3) of Rule 6 of Cenvat Credit Rules, 2004. In these circumstances, we find that the applicant could able to make out prima facie a case for total waiver of pre-deposit of dues adjudged against them, accordingly, all dues adjudged is waived and its recovery stayed during the pendency of the appeal.
Decision:-Stay Petition allowed.

Comment:-The essence of this case is that mere discharging 10% of the price of the exempted goods due to non-availability of data at the beginning of the Financial year, would not disentitle the assessee from exercising the option of proportionate reversal later during the same financial year.
 

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