Claim of Duty on Goods can’t be Denied When Assessee reverse ineligible Credit: CESTAT allows Payment of 1% Duty rate on Fruit Pulp for PepsiCo India [Read Order]

The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that claim of duty on goods can’t be denied when assessee reverses ineligible credit and allowed the  payment of a 1% duty rate on Fruit pulp for Pepsico India

M/s. Pepsico India Holding Pvt. Ltd, the appellant challenged the Order passed by the Commissioner of Central Excise, Puducherry. During the course of verification of records of the appellant, it was noticed that they have cleared ‘fruit pulp or fruit juice based drinks’ on payment of an effective rate of duty of 1% by availing exemption under Notification No. 1/2011-CE dated 1.3.2011 vide sl. No. 24. As per the said Notification, the effective rate of duty of 1% is applicable only when no CENVAT credit on inputs or input services is availed.

The appellant has availed CENVAT credit on the inputs i.e. sugar and input services viz manpower supply agency services and other common services. Since the appellant had availed credit on the inputs and input services, it appeared that the benefit of an effective rate of duty of 1% was not available to them and they should have paid duty at the effective rate of 5% as per Sl. No. 11 of Notification No. 2/2011-CE dated 1.3.2011 under Chapter Sub Heading 2202 9020.

Two Show Cause Notices were issued proposing to deny the concessional rate availed by the appellant. After following the due process of law, the Commissioner has confirmed the demand of Rs.1,01,62,250/- (Rs 89,59,982/- + 12,02,268/-) along with interest. He also imposed a penalty.

Shri Raghavan Ramabhadran, counsel appeared for the appellant and Shri M. Ambe appeared for the Revenue.

It was stated that since they had simultaneously availed CENVAT credit, they had reversed the same to the tune of Rs.42,00,866/- for the period March 2011 to March 2012. Since the above reversal of the credit for the period March 2011 to October 2011 was carried out belatedly, interest @ 18% to the tune of Rs.3,23,674/- was also remitted by them on 21.11.2013.

Although the appellant had opted to pay duty on fruit pulp or fruit juice-based drinks at 1% under Notification No. 1/2011-CE, they had initially availed of CENVAT credit. However, they have on their own reversed Rs.42,00,866/- being the proportionate CENVAT credit availed on the inputs and input services on dutiable aerated waters and beverages and exempted fruit pulp or fruit juice-based drinks.

In light of the case Jai Beverage Pvt. Ltd. Vs. CCE, the two-member bench comprising Ms Sulekha Beevi C.S., Member (Judicial) and Shri M. Ajit Kumar, Member (Technical) held that “the appellant was eligible for payment of an effective rate of duty of 1% on the ‘fruit pulp or fruit juice based drinks’ cleared by them, during the impugned period, by availing exemption under Notification No. 1/2011-CE dated 1.3.2011”

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