Letter by Central Excise and Customs Superintendent is Appeal able u/s 35: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, has recently, in an appeal filed before it, held that a letter by Central Excise and Customs superintendent is appealable under section 35.

The aforesaid observation was made by the Ahmedabad CESTAT, when an appeal was filed before it by the Revenue, as against the order of the commissioner (Appeals), dated 22.01.2013.

The brief facts of the case were that the respondent was engaged in the manufacture of bulk drugs as well as tablets. They also imported various drugs formulations and repacked them in a smaller size and cleared the same by discharging excise duty. The unit was registered with the Central Excise department, and had an in-house medical centre, which rendered medical facilities to the employees of the company. And, at times other neighbouring manufacturing units also availed medical facilities from the said centre.

The respondent was receiving various duty paid inputs and capital goods as well as input services, and also had a plant for Nitrogen, Steam plant, Chilling unit and compressed air unit for the use in the manufacturing process. These facilities are also shared by the respondent with neighbouring units like Bayer Corp Science and Novartis.

For manufacturing of final products, the respondent was using common facilities/ machineries as well as common input services for the manufacturing of drugs which were both dutiable and exempt. Thus, the respondent was using the services both for dutiable as well as exempted operations but, had not maintained separate books of accounts for receipt and payment of input services.

It so happened that the respondent received a show cause notice in 2007, on account of Cenvat credit of service tax paid on input services availed by them. The show cause notice alleged that the respondent cannot avail the Cenvat credit of service tax paid on all input services, because the said services were used for both types of goods i.e., dutiable as well as exempted.

Therefore, the respondent had not been availing Cenvat credit of the service tax paid on such input services since the Financial Year 2007-08. And since then, the respondent had availed Cenvat credit only of the credit passed to it by the Input Service Distributor, which was the head office of the Company.

The respondent desired to avail Cenvat credit of the input services for the Financial Year 2007-08 to 2011-12, and thus calculated the amount of Cenvat credit eligible for the respective Financial Year as per the provisions applicable in the relevant financial year.

For this, the respondent first identified the services which were received by the Company, on which service tax was paid and which satisfied the definition of ‘input service’ under Rule 2(l) of Cenvat Credit Rules, 2004, and then identified the services that were used for both dutiable as well as exempted goods.

Thereafter, the respondent calculated the eligible credit under Rule 6(5) and then calculated the proportionate credit eligible after considering reversal as required under Rule 6(3), for common input services. And after such calculation, the respondent filed an intimation for availing Cenvat credit, dated 21.09.2012, for each of the financial years, to the department.

Subsequently, the respondent received a letter dated 25.09.2012, from the Superintendent, Central Excise & Customs, Range-1, Division-II, Aknkleshwar, who, Vide the said letter directed the respondent not to avail the Cenvat credit for the period 2007-08 to 2011-12 as mentioned in the respondent’s letter, furtherstating that recovery action along with penal actions would be initiated against the respondent, if the respondent availed/ utilized the credit.

Being aggrieved by the letter dated 25.09.2012 issued by Superintendent, Central Excise & Customs, Range-1, Aknkleshwar directing respondent not to avail Cenvat credit on various input services for the period 2007-08 to 2011-12, the respondent filed an appeal before Commissioner (Appeals), thereby making elaborate submissions for setting aside the letter dated 25.09.2012, along with consequential relief to the respondent.

And, the Commissioner (Appeals), after considering all the submissions made on behalf of the respondent, thus allowed the appeal vide OIA No. CCEA-SRT-IISSP-242-U-S-35-A, dated 17/22.01.2013 And, it is being aggrieved by the said order dated 22.01.2013 in so far as it is against the appellant-Revenue, that the Revenue has preferred the present appeal before the CESTAT.

Hearing the opposing contentions of both sides as submitted by Shri Ghanasyam Soni, the Addl. Commissioner (AR), appearing on behalf of the Revenue-appellant, as well as by Shri Anand Nainawati with Shri Amber Kumrawat, the Counsels appearing on behalf of the respondent, and thereby perusing the materials available on record, the CESTAT observed:

“We have carefully considered the submissions made by both the sides and perused the record. We find that the only grievance of the Revenue in their appeal is that learned Commissioner (Appeals) should not have entertained the appeal against the letter written by Superintendent. In this regard we find that there is no dispute that appellant have sought allowance of credit in respect of input service attributed to dutiable goods which was very much in accordance with the Cenvat Credit Rules. The Superintendent vide letter dated 25.09.2012 denied the benefit claimed by the appellantassessee. It is also stated in the said letter that in case of availment of credit which was claimed by the appellant, penal action shall be taken against the respondent. The said letter therefore is clearly a decision given by a proper officer. The appeal provisions before the Commissioner (Appeals) are provided under Section 35.”

“From the plain reading of Section 35, it is clear that any decision or order passed by a proper officer below the rank of Commissioner is appealable before Commissioner (Appeals). Accordingly, there is absolutely no ambiguity in Section 35. The letter whereby the Superintendent has clearly held that respondent is not eligible to take credit, the said letter is clearly a decision against which appeal lies before Commissioner (Appeals) as per the strict interpretation of Section 35. We also notice that if the department’s contention is accepted then the respondent left with no remedy against denial of substantial benefit claimed by the respondent and respondent is remediless. The decisions cited by the respondent clearly support their case”, the coram of of Mr. Ramesh Nair, the Member (Judicial) and Mr. C L Malhar, the Member (Technical) added.

Thus, the Ahmedabad CESTAT finally held:

“In view of our above observation, we are of clear opinion that in the facts of the present case the letter written by Superintendent is a decision against which the appeal lies before Commissioner (Appeals) under Section 35 of the Act. Accordingly, the order of the Commissioner (Appeals) is absolutely legal and correct hence the same is upheld. The appeal is dismissed.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates