The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) Rule 6(3) of CCR not applicable on cenvat credit attributable to non-excisable goods not availed at the initial stage
The Appellant, M/s. Hindustan Colas Pvt. Ltd manufactures dutiable/ excisable goods such as bitumen emulsion, road bond emulsion etc. The Appellant also produces non excisable products like Crumb Rubber Modified Bitumen (“CRMB”) and Polymer Modified Bitumen (“PMB”). During the period FY 2013 – 2014 to FY 2017 – 2018 (till June 2017), the Appellant used common inputs (Bitumen VG10, Bitumen VG 30 etc.) and input services (manpower recruitment, legal consultancy, GTA, rent-a-cab, security, courier etc.) for manufacture of dutiable goods as well as for production of nonexcisable goods like CRMB and PMB.
The Appellant availed CENVAT credit and subsequently reversed the credit availed on common input and input services used for the production of non-excisable goods in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 and such reversal was shown by the Appellant in its ER-1 returns. During the audit, a spot memo dated 26.07.2013 was issued to the Appellant stating that production of CRMB and PMB does not tantamount to “manufacture” in terms of Section 2(f) of the Central Excise Act, 1944 in view of the Supreme Court’s decision in the case of CCE, Bangalore vs. Osnar Chemicals Pvt. Ltd.
Therefore, the Appellant should not have availed the CENVAT credit of duty paid on common input and input services used for making CRMB and PMB at the very first instance. It was further stated that availing and reversal thereof in terms of Rule 6(3) of the CENVAT Credit Rules, 2004 was not correct since Rule 6 applies only to non-excisable goods and CRMB and PMB do not fall within the definition of exempted goods.
Accepting the Audit objection, the Appellant informed the department that as per their SAP system, each time any common input was used for the production of CRMB and PMP, proportionate CENVAT credit was automatically computed for reversal.
A Show Cause Notice was issued demanding differential duty of CENVAT credit amounting to Rs. 8,22,43,578/- under Rule 14 of the CENVAT Credit Rules, 2004, along with interest and penalty. In the Notice, it has been alleged that the Appellant has not maintained separate records/accounts as per Rule 6(2) of the CENVAT Credit Rules, 2004 and has incorrectly availed CENVAT credit of the duty paid on common inputs and input services utilized in making non-excisable goods such CRMB and PMB
The Notice was adjudicated by the Commissioner, Haldia vide the impugned order wherein he confirmed the demands made in the Notice on the ground that the fact of reversal/non-availment of credit is not evident from any official record including the ER-1 return of the Appellant and details of SAP software being private records of the Appellant cannot be accepted.
Further, the Appellant had submitted a CA certificate from M/s Ford Rhodes Parks and Co LLP certifying that they have not availed credit on inputs and reversed credit on input services. However, the Commissioner has not accepted the certificate issued by the CA. Being aggrieved with such O-I-O, the Appellant has filed the present appeal.
A two-member bench of Mr R Muralidhar Member (Judicial) and Mr K Anpazhakan Member (Technical) observed that after June 2013, when the audit objected, the Appellant changed their practice and stopped availing credit at the initial stage itself. This has been done through their SAP system wherein each time any common input was used for the production of CRMB and PMP, the SAP system automatically computes proportionate CENVAT credit for reversal. They have started availing only the net CENVAT credit on inputs (viz. total credit on inputs less common credit attributable to production of CRMB and PMB).
It was further viewed that the Appellant has not availed CENVAT credit amounting to Rs. 13,39,49,749/- towards common inputs, whereas the demand confirmed in the impugned order is only Rs.8,22,43,578/-, which is much less than the amount of Cenvat credit not availed.
The CESTAT held that “the demand confirmed in the impugned order is not sustainable and hence we set aside the same. Since the demand itself is not sustainable there is no question of demanding interest or imposing penalty.”
The Tribunal set aside the impugned order and allowed the appeal filed by the Appellant.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
