2018 (6) TMI 235 – CESTAT MUMBAI – TMI – Penalty u/s 11AC of CEA, 1944 – trading activity of bought out items – CENVAT credit in respect of common input service – The case of the department is that the appellant was supposed to reverse the CENVAT credit under Rule (3A) of the CCR 2004 attributed to the trading activity being an exempted service – applicability of Rule 14 – Held that:- As per Rule 6(3A), it can be seen that the only requirement is to pay the proportionate cenvat credit along with interest @ 24%. There is no provision for imposition of penalty.
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Rule 14 is applicable only in case where the cenvat credit is wrongly taken and utilized. In the present case, it is not a case of wrong availment/utilization of cenvat credit but the demand under Rule 6(3A). Therefore, Rule 14 is not applicable – there is no specific provision unlike in the case of duty evasion or wrong availment of credit for imposition of penalty under Section 11AC.
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Revenue relied upon the case of
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) of the Cenvat Credit Rules, 2004 attributed to the trading activity being an exempted service. The demand of cenvat credit was confirmed and a penalty of equal amount was imposed under Section 11AC. The learned Commissioner (Appeals) upheld the order-in-original. Therefore, the appellant is before me. 3. Shri Rajesh Ostwal, learned counsel appearing on behalf of the appellant, submits that the appellant has been availing cenvat credit on common input service prior to 1.4.2012 and manufacturing the excisable goods as well as doing the trading activity. From 1.4.2012, the trading activity was made exempted service in terms of clause (e) of Rule 2 of the Cenvat Credit Rules, 2004. Since the appellant was not aware of the trading activity being an exempted service from 1.4.2012, they continued the practice adopted prior to 1.4.2012. Therefore, there was no mala fide intention to evade any payment of duty. Therefore, there was no suppression of fact on the part of the appellant. He furthe
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bmits that the appellant has recorded the trading activity and availment of cenvat credit in their books. Therefore, the case was also made out on the basis of records. As per Section 11AC(1B) of the Central Excise Act, 1944 if the case is made out on the basis of records, penalty shall stand reduced to 50%. Therefore, in any case, 100% penalty is not correct. 4. Shri M.R. Melvin, learned Superintendent (AR) appearing on behalf of the Revenue, reiterates the finding of the impugned order. He placed reliance on the following judgments:- (i) Bajaj Hindustan Ltd. vs. UOI – 2013 (295) ELT 20 (All.). (ii) CCE, Chennai-II vs. SRF Ltd. – 2014 (305) ELT 519 (Mad.). 5. I have carefully considered the submissions made by both the sides and perused the records. I find that in the present case, the demand is under Rule 69(3A) of the Cenvat Credit Rules, 2004, which reads as under:- (3A) For determination of amount required to be paid under clause (ii) of sub-rule (3), the manufacturer of goods or
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s and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of final products or the provider of output service shall determine the credit required to be paid, out of this total credit of inputs and input services taken during the month, denoted as T, in the following sequential steps and provisionally pay every month, the amounts determined under sub-clauses (i) and (iv), namely :- (i) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of exempted goods removed or for provision of exempted services shall be called ineligible credit, denoted as A, and shall be paid; (ii) the amount of CENVAT credit attributable to inputs and input services used exclusively in or in relation to the manufacture of non-exempted goods removed or for the provision of non-exempted services shall be called eligible credit, denoted as B, and shall not be required to be paid; (ii
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roducts were manufactured or no output service was provided in the preceding financial year, the CENVAT credit attributable to ineligible common credit shall be deemed to be fifty per cent. of the common credit; (v) remainder of the common credit shall be called eligible common credit and denoted as G, where,- G = C – D; Explanation.- For the removal of doubts, it is hereby declared that out of the total credit T, which is sum total of A, B, D, and G, the manufacturer or the provider of the output service shall be able to attribute provisionally and retain credit of B and G, namely, eligible credit and eligible common credit and shall provisionally pay the amount of credit of A and D, namely, ineligible credit and ineligible common credit. (vi) where manufacturer or the provider of the output service fails to pay the amount determined under sub-clause (i) or sub-clause (iv), he shall be liable to pay the interest from the due date of payment till the date of payment of such amount, at
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denoted as B(Annual); (iii) common credit left for further attribution shall be denoted as C(Annual) and calculated as, – C(Annual) = T(Annual) – [A(Annual) + B(Annual)]; (iv) common credit attributable towards exempted goods removed or for provision of exempted services shall be called Annual ineligible common credit, denoted by D(Annual) and shall be calculated as, – D(Annual) = (H/I) x C(Annual); where H is sum total of- (a) value of exempted services provided; and (b) value of exempted goods removed; during the financial year; where I is sum total of – (a) value of non-exempted services provided, (b) value of exempted services provided, (c) value of non-exempted goods removed; and (d) value of exempted goods removed; during the financial year; (d) the manufacturer or the provider of output service shall pay on or before the 30th June of the succeeding financial year, an amount equal to difference between the total of the amount of Annual ineligible credit and Annual ineligible com
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eligible common credit, namely, [{(A+D) aggregated for the whole year)} – {A(Annual) + D(Annual)}], where the former of the two amounts is greater than the later; (g) the manufacturer of the goods or the provider of output service shall intimate to the jurisdictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per the provisions of clauses (d), (e) and (f) , the following particulars, namely :- (i) details of credit attributed towards eligible credit, ineligible credit, eligible common credit and ineligible common credit, month-wise, for the whole financial year, determined as per the provisions of clause (b); (ii) CENVAT credit annually attributed to eligible credit, ineligible credit, eligible common credit and ineligible common credit for the whole of financial year, determined as per the provisions of clause (c); (iii) amount determined and paid as per the provisions of clause (d), if any, with the date of payment of
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t Rule 14 is applicable only in case where the cenvat credit is wrongly taken and utilized. In the present case, it is not a case of wrong availment/utilization of cenvat credit but the demand under Rule 6(3A). Therefore, Rule 14 is not applicable. Therefore, there is no specific provision unlike in the case of duty evasion or wrong availment of credit for imposition of penalty under Section 11AC. The judgments relied upon by the learned counsel also support this view. As regards the judgment relied upon by the Revenue, it is observed that in the case of Bajaj Hindustan Ltd. (supra), the appellant had wrongly availed the cenvat credit. In the case of SRF Ltd. (supra), the issue is demand of differential duty. Therefore, in none of these two cases, the issue of demand under Rule 6(3A) is involved. Therefore, these judgments are entirely on the different facts as compared to the facts of the present case. 6. As per my discussion made hereinabove, the penalty was wrongly imposed under Sec
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