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PJ/Case law/2013-14/1627

Whether rejection of declaration reversing credit along with interest was proper in view of retrospective amendment in Rule 6?

Case:-  ROCHEM SEPARATION SYSTEMS (I) OVT. LTD. VERSUS COMMR. OF C.EX., THANE-II

Citation:-2013(30) S.T.R. 208 (Tri.-Mumbai)

Brief Facts:-Applicant filed this application for waiver of pre-deposit of duty of Rs. 2,09,84,411/-, interest and penalty. Demand is confirmed in view of the pro­visions of Rule 6(3)(b) of the Cenvat Credit Rules on the ground that the appli­cants were availing input service credit in respect of common input services and the same were used in the manufacture of excisable as well as exempted goodsduring the period from March, 2005 to November, 2008.

Appellant Contentions:- The Appellant has submitted that provisions of Rule 6 were ret­rospectively amended by Section 73 of the Finance Act, 2010 and as per the pro­visions of retrospective amendment, in case where the manufacturer is availing credit in respect of the common inputs services and the same are being used in exempted as well as excisable goods, the manufacturer has to re­verse the credit attributed to the exempted goods and for the past period an op­tion was given to file a declaration reversing the credit alongwith interest to the Commissioner of Central Excise. In pursuance of the provisions of Section 73 of the Finance Act, 2010, the applicant filed a declaration on 15-10-2010 after revers­ing the credit of Rs. 2,91,696/- alongwith interest on the ground that this amount is attributed to the credit in respect of taxable services used in or in relation to manufacture of the exempted goods.

The contention of the applicant is that the Commissioner of Central Excise rejected their declaration without calling upon the applicant to make the case justified. Consequently the Commissioner of Central Excise also confirmed the demand in view of the provisions of Rule 6(3)(b) in respect of the show cause notice already issued.

The contention is that the rejection of the declaration filed under Sec­tion 73 of the Finance Act is not sustainable as the Commissioner of Central Ex­cise has no power to reject the declaration. The Commissioner of Central Excise, in case the amount has not been paid correctly, has to call the assessee and con­vey the exact amount required to be reversed. In this situation, the rejection of the declaration is not sustainable and the consequential demand in pursuance of the show cause notice is also not sustainable.

Respondent Contentions:-The Respondent reject the declaration filed under section 73 of the Finance Act, 1994 on the ground that the applicant had not cor­rectly reversed the credit attributable to input services used in or in relation to manufacture of the exempted goods. The contention of the applicant is that as per provisions of Section 73 of the Finance Act the Commissioner of Central Excise on receipt of application in respect of reversal of credit attributable to the common input services used in or in relation of manufacture of exempted goods can verify the correctness of the amount paid within a period of two months from the date of filing of declaration and in case it is found that the amount paid is less, the Commissioner of Central Excise can direct the applicant to pay the differential amount which was to be paid within 10 days from the date of com­munication from the Commissioner of Central Excise in this regard.
The Revenue relied upon the evidences of the lower authority to sub­mit that the applicant has not disclosed the true facts and circumstances, there‑fore, it has rightly rejected the declaration. The declaration was rejected on the ground that the applicant has not maintained separate record on the taxable ser­vices used in or in relation to manufacture of the excisable goods. Hence, the demand is rightly made.

Reasoning of Judgment:We have considered the submission from both the parties and perused the record, we find that the demand is confirmed under Rule 6(3)(b) of Cenvat Credit Rules on the ground that applicant availed CENVAT Credit in respect of the common input services which were used in or in relation to manufacture of exempted and excisable goods. As per the provisions of Section 73 of the Finance Act, 2010, for the previous period the assessee has to file a declaration showing the reversal of credit along with interest attributable to the credit in respect of inputs used in the manufacture of the exempted goods. The applicant filed nec­essary declaration and reversed the credit of Rs. 2,91,696/- along with interest. The Commissioner of Central Excise has to, on receipt of an application under sub-section (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the declaration and in case the amount so paid is found to be less than the amount payable, the Commissioner has to call upon the applicant to pay the differential amount along with interest, which shall be paid within a period ten days from the date of receipt of the communication from the Commissioner in this regard.

In the present case, the declaration filed by the applicant was re­jected without affording an opportunity of hearing to the applicant. Further, we find that as per the provisions of Section 73 of Finance Act, 2010 in case the amount so paid is found to be less that the amount payable, the Commissioner has to call upon the assessee to pay the differential amount along with interest. From the order passed on the declaration, we find that the applicant has depos­ited an amount of Rs. 2,91,696/- whereas during the period in question, the ap­plicant claimed credit of Rs. 20,97,979/- in respect of the common input services used in or in relation to manufacture of the goods. The verification report of the Dy. Commissioner of Central Excise show that the applicant requires to reverse the credit of Rs. 8,61,411/- attributable to the input services used in or in relation to manufacture of the exempted goods.

In view of the above, we find merit in the contention of the appli­cant that the rejection of the declaration filed under provisions of Section 73 of the Finance Act, 2010 is not sustainable. From the record, we find that as per veri­fication reported conducted by the Dy. Commissioner, the applicant is liable to reverse the credit of Rs. 8,61,411/- and applicant had reversed the credit of Rs. 2,91,696/- only. In these circumstances, the applicant is directed to deposit the amount as per the verification report(deducting the amount already deposited) within four weeks and on deposit of the above mentioned amount, the pre- deposit of the balance amount shall stand waived and recovery thereof stayed.

As noted above, the order rejecting the application under Section 73 of the Finance Act, 2010 is not sustainable, therefore, the impugned orders reject­ing the application as well as demanding duty in view of the provisions of Rule 6(3)(b) of the Cenvat Credit Rules are set aside and the matter is remanded to the jurisdictional Commissioner of Central Excise for de novaadjudication after af­fording reasonable opportunity of hearing to the appellant.
 
Decision:-The appeal is allowed by the way of remand.

Comment:-The crux of this case is that bluntly rejecting the declaration filed by the assessee regarding reversal of credit is not proper on the part of the adjudicating authority and if the adjudicating authority was of the view that credit reversal is less or improper, the same should be communicated to the assessee. 

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