Whether failure to intimate availment of option of proportionate reversal lead to confirmation of demand of 5% of exempted services?

PJ/Case Law/2014-15/2190

Case:- EMAMI LIMITED Vs COMMISSIONER OF CENTRAL EXCISE, VAPI

Citation:- 2014 (33) S.T.R. 411 (Tri. - Ahmd.)

Brief facts:- The two stay petitions were filed for the waiver of pre-deposit of amount of duty of Rs. 1,26,87,564/- with interest and equal amount of penalty on the appellant firm and personal penalty of Rs. 1 lakh on authorized signatory.
The above said amount had been confirmed against the assessee-appellant on the ground that the appellant had availed Cenvat credit of the Service Tax paid on the common inputs which were used in the exempted as well as dutiable finished products manufactured and cleared from their factory and had not followed the procedure as per Rule 6(3) of the Cenvat Credit Rules, by not maintaining the separate books of account.

Appellant’s contentions:- Learned counsel took through the order-in-original and the provisions of Rule 6 of Cenvat Credit Rules, 2004. It was his submission that the appellant had already reversed an amount for Rs. 5,98,157/- along with interest of Rs. 1,78,312/- calculated as per the provisions of Rule 6(3A) of Cenvat Credit Rules, 2004. It was his submission that they had produced Chartered Accountant’s certificate before the lower authorities which was annexed at Pages 48 and 49 of the appeal memorandum. It was his submission that the adjudicating authority had not considered the same in its proper perspective.
Learned counsel also relied upon the decision of this Tribunal in the case of Global Pharmatech Pvt. Limited v. CCE, Chennai - 2011 (274)E.L.T.413 (Tri.-Chennai)for the proposition that, once an amount attributable to the inputs which go in the manufacture of exempted goods were reversed, post-amendment the Rule 6(3) of Cenvat Credit Rules, 2004, it was substantial compliance of the law.

Respondent’s contentions:- Learned Departmental representative on the other hand submitted that appellant herein had not given option of reversal of Cenvat credit to the lower authorities before reversing the same. It was his submission that the calculation which were indicated also seemed to be incorrect as they contained the services like advertising agency services, which were attributable to the goods manufactured and cleared.

Reasons of judgment:- On careful consideration of the submissions made by both sides, the tribunal found that there was no dispute as to the fact that appellant was availing Cenvat credit of the Service Tax paid on the input services distributed by their Head Office as Input Service Distributor. It was also undisputed that the appellant was utilizing the ISD service tax credit for discharge of Central Excise duty on the goods manufactured and cleared by them. It was seen from the records that the appellant had claimed that they have reversed the amount which was attributable to the input services which go into manufacturing of exempted products, as per the provisions of Rule 6(3) of Cenvat Credit Rules, 2004. They also found from the certificate issued by the Chartered Accountant that it was so. At this juncture, though the appellant could have intimated the departmental authority regarding the option of reversal of input services which were attributable to the exempted goods but having reversed the same, the Tribunal found that appellant had made out a prima facie case for the waiver of pre-deposit of amount which were confirmed against the main appellant on the ground that they were liable to pay 5% of the value of the exempted goods cleared from their factory premises.
In view of the above, applications for the waiver of pre-deposit of amounts involved were allowed and recovery thereof stayed till the disposal of appeals.

Decision:- Stay granted.

Comment:- The analogy drawn from the case is that mere non-intimation of the availment of option of the proportionate reversal cannot be reason to deny the benefit of proportionate reversal and confirm the demand of 5% of value of exempted services.

Prepared by:- Ranu Dhoot

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PJ/Case Law/2014-15/2190

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