The Chandigarh bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)has held that Excise Duty is not demandable when the Cenvat credit attributable to zinc sulphate cleared reversed and remanded the matter for adjudication.
The appellants, M/s Bhoomi Sudhar Chemical Industries Limited, are manufacturers of zinc sulphate, a micro-nutrient fertilizer falling under CETH 2833 2610; the said product attracted Nil rate of duty till 31.12.2006; with effect from 01.01.2007, the tariff entry got omitted and the impugned item was not mentioned anywhere; vide Notification No.36/2007 dated 09.10.2007, the said zinc sulphate was re-classified under CETH 2833 2990 and was exempted.
The industry including the appellant was under the impression that the product continued to be exempted even after 01.01.2007 and accordingly did not pay duty; vide Notification No.13/2009-CE (NT) dated 05.06.2009, the duty payable on the micro-nutrient zinc sulphate was exempted, for the period 01.01.2007 to 08.10.2007, under the provisions of Section 11C of Central Excise Act, 1944, subject to the condition that CENVAT credit will not be taken and if taken, reversed.
Show-cause notices were issued to the appellants seeking to recover Central Excise duty amounting to Rs.54,96,652/- along with interest and penalty, the said show-cause notice was adjudicated vide the impugned order dated 12.01.2011 confirming duty of Rs.48,54,698/-. The Commissioner dropped the demand of duty of Rs.6,41,954/- on the 218.100 MT of zinc sulphate purchased from outside on which no credit was taken.
Shri Vibhor Garg, who appeared for the appellants, submitted that Commissioner had obtained two reports from the jurisdictional Deputy Commissioner, Central Excise, Sangrur Division; the report dated 16.03.2010 indicated that the appellants have reversed the CENVAT credit attributable to the zinc sulphate cleared by them during the relevant period and thus, the demand does not survive.
Shri Rajeev Gupta, assisted by Shri Shivam Syal, Authorized Representatives for the Department, reiterated the findings of the impugned order and submitted that the appellants are importing zinc skimming, which is pulverized and sieved to obtain zinc and zinc ash, from the zinc so obtained, zinc ingots are manufactured and cleared.
The appellants have paid duty on zinc ash for some period and holding that the same did not amount to manufacture applied for refund of duty paid on zinc ash and have been sanctioned the refund; the appellants based their submissions on non-utilization of credit or reversal of credit of duty paid on zinc ash, whereas they require to reverse the CENVAT credit availed on imported zinc skimming.
The service tax paid on transport of goods and Custom House Agent Services which are common services for the manufacture of zinc ingots and zinc ash. He submits that unless the CENVAT credit availed on these inputs and input services is reversed, the benefit under Notification No.12/2009 is not admissible.
A two-member bench of Mr S S Garg, Member (Judicial) and Mr P Anjani Kumar, Member (Technical) viewed that the matter needs to travel back to the Commissioner to examine the report dated 16.03.2010 and to record reasons as to why the same was not considered.
The appellants are also required to submit, to the satisfaction of the Adjudicating Authority, along with necessary documents, as to which credit they have reversed. The Adjudicating Authority, if he requires so, may obtain a categorical and comprehensive report from the field formation to make it clear as to whether the appellants have reversed the credit availed by them in order to be eligible for the exemption contained in Notification No.12/2009.
The CESTAT set aside the impugned order and allowed the appeal by way of remand to the Adjudicating Authority.
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