In a ruling in favour of Dabur India Ltd, the Kolkata bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Rule 6 of the Cenvat Credit Rules, 2004 as Honey is not an Exempted Good.
The appellant are having their unit at Narendrapur and engaged in the manufacturing of Glucose which is dutiable and Madhu/Honey against which no rate of duty as specified in the First Schedule to the CETA. Apart from the aforementioned activities, the appellant was also engaged in trading goods manufactured by third parties, which is an exempt service.
To comply with the provisions of Cenvat Credit Rules, 2004, the appellant did not avail credit of common input services received by them in their unit provisionally every month but finally availed such credit only in the next financial year after actualization of the turnover numbers of such financial year. This continued up to 31.03.2015 and thereafter the appellant started availing the Cenvat credit of common input services availed by them on a provisional basis every month, which was finalized in June of the next year in terms of Rules 6(3A) of Cenvat Credit Rules, 2004.
The credit for advertisement services was distributed only to the extent it pertained to the taxable Glucose. As regards the credit on other services, the ISD applied the provisions of Rule 6(3)(ii) of the CCR. 2004 and apportioned the remaining credit in the Production Value Ratio of all the units.
After such apportionment, only so much credit proportionate to the taxable turnover of all the units was distributed by the ISD. Except for the credit for trading activity, the ISD distributed the entire credit among all the units in their Production Value Ratio. The appellant applied for the provisions of Rule 6(3)(ii) of the CCR on canvas credit distributed by the ISD in the ratio of taxable turnover to total turnover during the preceding financial year, on a provisional basis.
The appellant availed the total credit on advertisement and other services during the period March 2011 to July 2014 of Rs.2,51,95,770/- and during the period from August 2014 to June 2015 Rs.98,55,743/-. The revenue issued two show cause notices proposing to recover 6% of the value of honey treating it as exempted goods cleared by the appellant during the impugned period under Rule 6(3)(i) of the CCR, 2004. The demand was confirmed by the impugned orders.
It was submitted that rule 6 of the CCR, 2004 is not invocable in the facts of this case, as honey is non-excisable. Further submitted that Rule 6 of CCR, 2004 provides that cenvat credit shall not be allowed on inputs and input services used in or in relation to exempted goods or exempted services and such credit not allowed shall be calculated and paid in terms of the provisions of sub-rule 2 or 3 of the rules.
Section 2(d) of the Central Excise Act, 1944 defines the terms ‘excisable goods’ as goods specified in the First and Second Schedule of the CETA as being subject to duty of excise including salt and honey is classifiable under CTH 04090000 of the CETA against which no rate of duty has been specified, therefore, honey is non-excisable since it is not chargeable to any rate of duty including NIL rate.
In light of judgement of Supreme Court in the case of Union of India v. DSCL Sugar Ltd, the two member bench comprising Shri Ashok Jindal, Member(Judicial) and Shri K Anpazhakan, Member(Technical) held that the provisions of rule 6 are not applicable to the facts of this case as Honey is not an exempted goods.
Further held that the proceedings against the appellant are not sustainable under Rule 6 of the Cenvat Credit Rules, 2004.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
