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File No.APPL-COMMOCEX/3/2019-GST- APL-CHD

OFFICE OF THE COMMISSIONER GST & CENTRAL EXCISE (APPEALS)

C. R. BUILDING, PLOT NO 19, SECTOR 17-C, CHANDIGARH C. No. APPL-COMMOCEX/3/2019-GST-APL-CHD Dated~...l0.2019 ---- Appeal No. 64-66/A/CE/CHD/2018-19 d- ce f ~ ~6 ~ ~

ORDER-IN-APPEAL \51'- \ bO

Final Order No' CHD-EXCUS-OO 1-APP- -19-20 Dated~10.2019

Name of the Appellant Mis Fresenius Kabi Oncology Ltd., Plot No 19, HPSIDC, Industrial Area Baddi, Distt. Solan (HP)

Order-in-Original No. 23-25/CE/JC/SMLl20 18-19 dated 19.11.2018 & Date

Name of the Joint Commissioner, CGST Commissionerate, Adjudicating Authority Shimla

Amount of Central Rs 4,46,47,099/- (involved in three SCN's) Excise Duty involved

A mount of Penalty Rs 4,46,47,099/-

Period of Dispute April, 2013 to June, 2017

Mis Fresenius Kabi Oncology Ltd. Plot No 19, HPSIDC, Industrial Area Baddi, Distt. Solan, (H.P.) (for brevity 'the appellant') has filed the subject appeal against the Order-in-Original 0.23-25/CE/JC/SMLl20 18-19 dated 19.11.2018 (for brevity 'the

~c\1.1-ri)p gned order') passed by the Joint Commissioner, CGST Commissionerate, Irlt-~$ ( Shimla (for brevity 'the adjudicating authority') in the case of appellant. The

proceedings in the current appeals emanate from the Show Cause Notice as well ~ ~< c :~ ~ubsequent statements issued to the appellant for the period April 2013 to June ~l/)which was adjudicated by the adjudicating authority in a single order,

accordingly, I take up the instant appeal for decision.

2. Briefly stated that the Appellant were registered with the department vide Central Excise Registration No. AABCD7720LXM002 for the manufacture of Medicaments, Anti Cancer Injections falling under Chapter Sub-Heading No

File No.APPL-COMMOCEX/3/2019-GST - APL-CHD

30049044 of the Central Excise Tariff Act 1985 (for brevity 'the CETA').

3. On 16.03.2015, the Appellant's records pertaining to Central Excise was audited by the Officers of Central Excise Audit Circle-1 Chandigarh. During the course of the audit, it was observed that the appellant was engaged in the manufacture of both dutiable as well as exempted goods. Further scrutiny of the CENVAT Credit records it was observed that the appellant was availing Cenvat credit on the common inputs and input services used in the manufacture of dutiable and exempted goods. Regarding maintaining of separate records for the availment of CENVAT Credit of input and input services used in the manufacture of exempted and dutiable goods in terms of the provisions of Rule 6 of the Cenvat Credit Rules, 2004 (say the CCR), the appellant could not put forward any plausible explanation before the audit team.

4. On being asked about the maintenance of separate accounts, the appellant contended that they were maintaining separate accounts and were not availing CENVAT credit on the inputs/input services which were utilized for the production of exempted goods. Further, the appellant produced an Invoice No. CORP/20I3-I4/02 dated 31112/2013 issued by the Input Service Distributor (here-ill-after referred to as ISD) namely Fresenius Kabi Oncology Limited (formally Dabur Pharma Limited), Plot No. 11 Sector 32 Echelon Institutional Area, Gurgaon 122001. On perusal of the said invoice it was noticed that CENVAT credit of Rs 35,65,4711- was passed on to the appellant by the ISD. On further perusal of the supporting calculation chart pertaining to the year 2011-12 it was observed that the input CENVAT Credit was distributed to the appellant under two heads i.e. for common services and for specific services. In the said supporting chart under the head common services CENVAT credit of Rs. 48,31,630/- had been shown to be admissible and subsequently out of this CENVAT credit, an amount of Rs. 24,95,537/- had been passed on to the ~~ellant and the rest of the amount of Rs 23,36,093/- had been shown as

t"":~ "'~~d~cted, being inadmissible. In the same calculation chart an amount of Rs. (( t: 1 0,69,934~- had been passed on to the appellant for specific services. As such, a ~ t9tal CENVAT Credit of Rs 35,65,471/- had been passed on to the appellant by

~SD.

5. The appellant could not produce any record before the audit officers in support of their contentions that they were maintaining separate records in terms of the provisions of Rule 6 of the Credit Rules. Further, it was observed that even the invoice issued by the ISD was not in conformity with the provisions of the

2


Rule 7 of the CCR. In the said invoice as exhibited in the calculations, the Input , Service Distributor could not simply deduct the amount of CENVAT credit by holding the same as inadmissible. From the perusal of the said invoice and supporting documents it could not be held or inferred that they were availing the CENVAT credit on proportionate basis or on the basis of some particular formula. The appellant also failed to substantiate that they had availed CENVAT credit on proportionate basis, which was available with them on account of other common input services like Security service and telephone services etc used in the factory premises. It was thus observed that the appellant had availed CENVAT credit in respect of common input services used in the manufacture of both dutiable as well as exempted goods, but did not maintain any separate records as prescribed under Rule 6(2) of the Credit Rules nor did follow the procedure as laid down under Rule 6(3) of CCR. The jurisdictional Range officer also took up the matter with the appellant and vide letter dated 08.03.2016 supplied the details of value of exempted goods cleared by the appellant for the financial year 2014-15 and also mentioned that the appellant had neither maintained any separate records nor had they reversed any Cenvat credit on proportionate basis for the financial year 2014-15. From the foregoing it appeared that the appellant had availed Cenvat credit on common input services and had neither maintained separate accounts nor reversed the Cenvat credit on proportionate basis in terms of the provisions of Rule 6 of the CCR. Therefore, for the year 2013-14 and 2014-15, they were liable to pay total amount of Rs 1,86,98,385/-. Similarly, for the period 2015-16 & 2016-17 (upto 30.06.2017) the appellant was liable to pay an amount of Rs 1,86,22,219/- & Rs 74,26,495/- respectively. Total demand comes to Rs 4,46,47,099/-.

6. Accordingly, SCN dated 19.01.2017 (April 2013 to March 2015); Statement dated 29.12.2017 (April 2015 to March 2016) and Statement dated 28.03.2018 (April 2016 to June 2017) for demand/recovery of an amount of Rs 86,98,385/-; Rs 1,85,22,219/- & Rs 74,26,495/- respectively alongwith recovery

~~f jnterest and Penalty were issued to the appellant. All the three notices were {<'l'''' adjudicated through a common order by the adjudicating authority wherein all the

demands were confirmed and ordered recovery of the same alongwith interest. ~ amounts of penalty were also imposed on the appellant

7. Being aggrieved, the appellant had filed the instant appeals against the above Orders-in-Original on the grounds which interalia were summarised as un der:

(A) APPELLANT HAD NOT AVAILED CENVAT CREDIT ON INPUT

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File NO.APPL-COMMOCEX/3/2019-GST - APL-CHD

SERVICES USED IN OR IN RELATION TO THE MANUFACTURE OF EXEMPTED FINAL PRODUCTS.

A.l That till February 2016, the Appellant did not avail Cenvat credit of service tax paid on any input service received for which service tax invoice was issued in the name and address of the Appellant. Thereafter, the Appellant started availing the Cenvat credit of service tax paid on common input services to the extent it was attributable to dutiable turnover

A.2 That the Appellant had also availed Cenvat credit of service tax on input services which was attributable to Appellant's dutiable turnover and distributed by head office as TSD in terms of the provisions of Rule 7 of the CCR. In the supporting documents forming part of ISD invoices, detailed computation of distributed credit and the amount of the credit to be reversed by the Appellant in the ratio of its exempted turnover was given. The Appellant availed the gross Cenvat credit distributed to it in Cenvat register but on the same date made the debit entry for the ineligible credit pertaining to exempted turnover.

A.3 That details of ISD invoices issued by the head office to the Appellant on the basis of which Cenvat credit was availed during financial year 2013-14, 2014-15,2015-16,2016-17 and 2017-18 (up to 30.06.2017) were tabulated in the given appeal. In Support, copy of Cenvat Register for the financial year 2016-17 and 2017-18 (up to 30.06.2017) were enclosed. The Appellant also disclosed the Cenvat credit so availed in the ER-l Return filed for May 2016, December 2016 and June 20] 7.

AA That it was factually evident that the Appellant had not availed Cenvat credit on any inputs or input services used in or in relation to manufacture of exempted final products. The Cenvat credit distributed by ISD office

~ was also availed to the extent it pertained to dutiable turnover only. Thus, #c,~ " - the demand confirmed in the impugned order was liable to be set aside on /

.• ' this ground itself.

FINDINGS GIVEN IN THE O-in-O WERE LEGALLY NOT ~. TENABLE

BJ That the Ld. Joint Commissioner had passed the impugned order without application of mind and without appreciating the allegations levelled in the SCNs, submissions made by the Appellants and the legal position in this regard.

B.2 That the findings of the adjudicating authority were not legally tenable and hence, the demand confirmed on the basis of those findings was liable to set aside.

4


B.3 That before 01.03.2016, the Appellant was availing the Cenvat credit on the basis of the ISD invoice issued to them by its head office who had distributed only the admissible portions of credit to the Appellant vide ISD invoices dated 31.12.2013 and 01.01.2014 and thus, they had availed the entire amount of Cenvat credit mentioned in the said ISD invoice. For the other ISD invoices issued, the amount mentioned therein was the total amount attributable to the Appellant's unit and was supported by the calculation which further bifurcated the entire amount between admissible and inadmissible Cenvat credit. Accordingly, the Appellant took the entire Cenvat credit and by the next line item in the Cenvat Register, on the same day, reversed the Cenvat credit which was pertaining to the exempted turnover and was inadmissible. Thus, the Appellant had availed only the admissible Cenvat credit pertaining to dutiable turnover and thus was not required to file separate intimation to the department in terms of Rule 6(3A) of the CCR. Further, details of Cenvat credit availed and reversed had been shown in the ER-I returns filed by the Appellant.

8.4 Further, from 01.03.2016 onwards, the Appellant also started availing Cenvat credit on the common services received and addressed to the Appellant only to the extent it was attributable to the dutiable turnover. The Appellant had informed the department about the availment of Cenvat credit on common services to the extent it was attributable to the dutiable turnover and had also explained the manner in which such amount was calculated. Thus, effectively, the Appellant had complied with the condition of filing the intimation as required under the Rule 6(3A) of the CCR. Without prejudice to above, substantive benefit could not be denied to the Appellant owing to procedural technical lapse.

B.S That non-intimation, if any, could not lead to confirmation of demand against the Appellant as factually the Cenvat credit pertaining to the exempted turnover was never availed by the Appellant and the Ld. Joint Commissioner had never disputed this fact nor the computation. That it was a well settled principle that merely because of a procedural

'" '~ lapse, the substantive benefit could not be denied to the assessee. In this /t;." \ t: ! regard, reliance was placed on the decision in the case of Aster Pvt. Ltd. v. ~ Commissioner of Customs & c. Ex., Hyderabad - in reported at 2016 (43) r 11'.;: s. T . 411 (Tri. - Hyd.) wherein it was held that the condition in Rule 6(3A)

tj _..:::;"" . . ~ - 0 mtimate the department was only a procedural one and that such procedural lapse was condonable and denial of substantive right for such procedural failure was unjustified. Similarly, reliance was also placed on the case of Hindustan Antibiotics Ltd. v. Commissioner of c. Ex., Pune

5

· .,


reported as 2016 (42) S. TR. 387 (Tri. - Mumbai), decision of the Hon 'ble CESTAT in the case of Jai Balaji Industries Ltd. vs. Commissioner of C. Ex. & S.T, Raipur - 2017 (352) E.L.T 86 (Tri. - Del.) affirmed by the Hon 'ble Chhattisgarh High Court as reported in 2017 (356) ELT A48 - Chhattisgarn High Court.

B.7 That in order to support its contention that the condition of non-filing of intimation as required under Rule 6 could not be condoned, the Ld. Joint Commissioner had relied upon the judgments of Hon'ble Apex Court who had concluded that an exemption notification has to be construed strictly and one should not go with the intendment while interpreting such judgments. The Apex Court had further held that the conditions in the exemption notification had to be interpreted in light of the words employed and not on any other basis. However, in the instant case, the issue under consideration was whether proportionate reversal made in terms of the manner provided under Rule 6(3A) of CCR without intimating to the department beforehand as provided in the said Rule was valid or not.

B.8 That since the subject matter of the Appellant's case and the case laws relied upon by the Ld. Joint Commissioner were entirely on different footing, the ratio laid down in these cases could not be applied to the facts of instant case. Hence, the demand which had been confirmed based on a finding arrived out by resorting to inapplicable case laws was liable to be set aside on this ground alone. The Impugned Order cannot go beyond the allegations contained in the SCN.

B.9 That the SCN was the foundation of judicial proceedings of any case and in no circumstances the findings of any adjudicating authority or appellate authority could go beyond the allegation already framed against the Appellant in the SCN, while passing the order. In this regard, reliance placed on the following judgments:

• CCE Mumbai v. Toyo Engineering India Limited - 2006 (201) E.L. T. 513 (S.C.) ~

(f: \ . .3

~j B.I0 That Rule G(3A) allowed an assessee to avail full Cenvat credit subject to tiL /./

"'" ----.-' e condition of reversal of credit pertaining to exempted turnover. In the instant case, except in those cases where ISD office distributed the credit pertaining to dutiable turnover only, the Appellant entered the details of entire credit pertaining to its unit as distributed by ISD office in the Credit

• CCE Nagpur v. Baltarpur Industries Ltd - 2007 (215) E.L.T. 489 (S.c.) • CCE v. Champdany Industries Ltd., 2009 (241) E.L.T. 481 (S.C.)

6


Register and immediately reversed the credit pertaining to exempted tumover in the Cenvat Register. Hence, the Appellant followed the manner provided in the Rule 6(3A) of CCR and the reasoning resorted by the Joint Commissioner was legally not tenable. Without prejudice to above, it was a settled legal position that the availment of Cenvat credit and immediate reversal without utilizing the same is as good as not taking the Cenvat credit.

B.ll In this regard Reliance placed on the decision of the Karnataka High Court in C. Ex. & s. T, Bangalore v. Mis Bill Forge Pvt. Ltd., 2012 (26) STR 204 (KaJ~), wherein after considering the judgment of the Hon'ble Supreme Court in the case of Union of India v. Ind-Swift Laboratories 2012 (25) S.T.R.184 (S.c.), it was held that interest liability shall arise only if the credit had been utilized for payment of duty. The above decision was also followed by the Karnataka High Court in the case of CCE, Bangalore-Il vs. Gokaldas Images (P) Ltd. - 2012 (278) ELT 590 (KaJ~). Reliance was also placed on the Hon'ble High Court judgment in the case of CCE v. Sweet Industries, 2011 (264) E.L. T 349 (Guj); Decision in the case of Commissioner of C. Ex., Mumbai-I v. Bombay Dyeing & Mfg. Co. Ltd., 2007 (215) E.L. T 3 (SC).

B.12 Thus, availment of Cenvat credit and immediate reversal was as good as not taking the said inadmissible credit and accordingly, there was no infirmity in the procedure followed by the Appellant. The impugned order, therefore, was not sustainable and deserves to be set aside on this ground itself.

(C) THE IMPUGNED ORDER HAD BEEN ISSUED IN GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE AND HENCE LIABLE TO BE SET ASIDE

~r- That the impugned order was nothing but a manifestation of clear oversight t of the law. The Impugned order had been passed in flagrant abuse of the .lj law aI},d in complete violation of the principles of natural justice and thus,

"j liable to be set aside . . 2t.r, 0\ , at the impugned order confirming the demand on the ground that the

Appellant had contravened the conditions of Rule 6(3A) of the CCR by not intimating the department was non-speaking as it had failed to examine the arguments advanced by the Appellant. The Ld. Joint commissioner while adjudicating all the three show cause notices had given a common finding that the Appellant had not submitted the intimation as required under Rule

7


6(3A) of the CCR. At the outset, the Appellant submitted that the finding based on which the Ld. Joint Commissioner had confirmed the demand had no where been alleged in the show cause notice and was not the subject matter of dispute.

C.3 That the Ld. Joint commissioner had failed to appreciate the submissions made by the Appellant in its reply to SCNs wherein it had been adequately explained that how the Appellant had reversed proportionate Cenvat credit and availed Cenvat credit pertaining to the turnover of dutiable products. Further, the Ld. Joint Commissioner had not given finding on all submission including the submissions made w.r.t. non-invocation of extended period of limitation and penalty. This showed the arbitrariness with which the impugned order was passed in gross violation of the principles of Natural Justice.

C4 That the principles of natural justice had been enshrined and regularly affirmed with the utmost fervor by the Hon'ble Supreme Court and all other judicial fora. Reliance placed on the decision of the Hon 'ble High Court in the case ofNitesh Kumar Kedia v. CCE 2012 (284) EL T 321 (Del.); case of Modipon Ltd. v. CCE, Meerut, 1996 (84) E.L. T 323 (Tribunal). The Appellant further relied on the following case laws in this regard:- • Tata Engineering & Locomotive Co. Ltd. ) 1. CCE 2006 (203) EL T 360

(SC) • CC v. Essar Oil Limited 201 J (2 I) STR 465 (Guj.) • Nitesh Kumar Kedia v. CCE 2012 (284) ELT 321 (Del.) • Ratlam Wires Pvt. Ltd. v. CCE 2010 (262) ELT ] I 18 (Tri.-Del.) • Penguin Electronics (P) Ltd. v. CCE 2005 (185) ELT 194 (Tri. -Mum.) • Man Structurals Ltd. v. CCE 2004 (166) ELT 376 (Tri.-Del.) • Salora International v. CCE, New Delhi, 2010 (262) ELT 467 (Tri. Dei.)

C.6 [n view of the aforesaid settled legal position, it was submitted that the Impugned order was passed without following the principles of natural justice and therefore, had no sanctity in the eyes of laws. Thus, the impugned order was liable to be set aside.

DEMAND FOR THE PERIOD FROM 01.04.2013 TO 31.03.2016 WAS TIME BARRED.

It was humbly submitted that the Ld. Joint Commissioner had adjudicated three SCNs dated 19.0l.2017; 29.12.2017 and 28.03.2018 vide the impugned order covering the period 0l.04.2013 to 31.03.2015, 01.04.2015

8


to 3l.03.2016 and 0l.04.2016 to 30.06.2017 respectively and had confirmed the amount by invoking the period of limitation on the ground that it was only upon audit of the Appellant that facts of availing Cenvat credit on the common inputs/input services used in the manufacture of dutiable & exempted goods without maintaining proper records and by not filing intimation with the jurisdictional Superintendent of Central Excise, had come to the notice of the department. However, the submissions made by the Appellant in its reply to SCN dated 19.0l.20 I 7 and 29.12.2017 regarding the invocation of extended period of limitation was ignored by the Ld. Joint Commissioner and had not given finding on their subm issi ons.

D.2 That in the instant case, in respect of SCN dated 19.0l.2017, the Ld. Joint Commissioner had confirmed the demand ofRs. 1,86,98,385/- being 6% of the value of exempted goods cleared during the financial year 2013-14 and 2014-15. During the said years, the Appellant availed the Cenvat credit which was disclosed in the ER-I Return filed for the months of December 20]3, April 2014 and May 2014, respectively. Since SCN invoking extended period of limitation was issued on 19.01.2017, the entire demand fall beyond the normal period of limitation of two years.

D.3 That the Appellant disclosed the Cenvat credit so availed in.

0.4 In respect of SCN dated 29.11.20 17 (covering the period 2015-16), the demand of central excise duty amounting to Rs. 1,85,22,2191- was confirmed against the Appellant under Rule 14 of the CCR read with the Section 11A of the Act, Section 142(8)(a) and Section 174(2) of the COST Act, on the basis that the Appellant had suppressed the material facts regarding non-maintenance of separate accounts and not filing the mandatory declaration under Rule 6(3A) of the CCR. It emerged from the above findings that the department had sought to demand the amount on the ground that the Appellant had suppressed the facts from the department with an intent to evade payment of amount.

_ -hat without prejudice to the submissions made in the foregoing grounds that the duty demand in the impugned order was not sustainable on merits, it was submitted that the finding in regard to suppression given impugned order was grossly incorrect. Moreover, since the SCN dated 19.01.2017

* was issued to the Appellant on the impugned issue for the earlier period, it t" ~I ~

--=-==enuld not be assumed that entire facts of the case were not m the

9


knowledge of the department. Further, demand had also been confirmed in respect of SCN dated 29.11.2017 of Rs. 1,85,22,2191- being 6% of the value of exempted goods cleared during the financial year 2015-16. However, during the said year, the Appellant availed ISD credit on 01.04.2015 only against the invoices mentioned in the table.

D.6 That the Appellant disclosed the Cenvat credit so availed in ER-I Return filed for the month of April 2015, copy of which was enclosed. Thus, for the purpose of Section llA of the Act, the relevant date for issuance of SCN would be counted from the date of filing the ER-l Return for the month of April 2015 only. Since the impugned SCN was issued on 29.11.2017, it was beyond the normal period of two years from the date of filing the ER-I Return for the month of April 20 15. Thus, in any case, entire demand of Rs. 1,85,22,1911- being fall under the extended period of limitation, could not be demanded from the Appellant.

D.7 That without prejudice to the submissions made in the foregoing Grounds that the demand confirmed in the impugned order was not sustainable on merits, it was submitted that the findings of suppression made in the impugned order for invoking the extended period of limitation were grossly incorrect. Thus, in any case the entire demand of Rs. 1,86,98,3851- in respect of SCN dated 19.01.2017 being under the extended period of limitation was liable to be set aside. No suppression of facts - All facts in the knowledge of the Department.

D.8 That the finding regarding suppression of facts from the department regarding availment of Cenvat credit on inputs/input services used for manufacture of dutiable and exempted goods was completely baseless. It was a settled legal position that the suppression exists in a case when information was deliberately hidden when being sought by a person. In the present case, the Appellant had never suppressed any fact relating to availment of admissible Cenvat credit from the department. This was for the reason that whatever Cenvat credit (including the credit distributed by

~SD) taken was disclosed in the ER-I Returns filed with the department.

~

~~: ':'.~. ~'()reover" the Appellant did not avail Cenvat credit of dut,y paid on those '~I , I mputs which were commonly used for manufacture of dutiable goods and

I') f \\,~~~ ~~ ~ exempted goods, nor availed Cenvat credit of duty paid on those inputs , tl !. c· which were exclusively used in the manufacture of exempted goods.

~ 'Similarly, the Appellant did not avail Cenvat credit of service tax paid on

10

File No.APPL·COMMOCEX/3/2019·GST· APL·CHD

any input service received for which service tax invoice was issued in the name and address of the Appellant. Since the said credit was never availed, there was no question of showing the same in the Cenvat records and ER-I Returns.

D.9 Hence, findings that these facts came to the knowledge of the department during audit and the Appellant had wilfully suppressed these facts from the department were completely baseless.

0.10 That the department could have scrutinized the ER-T Returns within two years from the relevant date and could have raised the demand if anything irregular was noticed within the normal period of limitation of two years. In this regard, reliance was placed on the decision in the case of CCE v. Trans Delta Electricals - 2010 (261) E.L. T 394 (Tri. - Mumbai), the decision of the Hon'ble CESTAT in the case of CCE vs. Andhra Pradesh Papers Mills Ltd. - 2011 (24) S. TR. 230 (Tri. - Bang.) , case of CCE v. ITC Ltd. - 2013 (291) E.L. T 377 (Tri. - Kolkata), Somaiya Organics (India) Ltd. v. CCE, ALLahabad - 2009 (244) E.LT liS (Tri. - Del.)

0.11 Reliance was also placed on the judgments in the following cases: • Saboo Coatings Ltd. v. CCE, Chd. - 2014 (36) S.T.R. 447 (Tri. -

Del.) • MTR Foods Ltd. v. CCE, Bang. - 2014 (312) E.L. T. 730 (Tri. - Bang.) • OmkarTextile Mills Pvt. Ltd. v. CCE, Ahd. - 2014 (311) E.L.T. 587

(Tri. - Ahmd.) • Jindal Stainless Steelway Ltd. v. CCE, Raigad- 2014 (310) E.L.T.

194 (Tri. - Mum.) New Al1enberry Works v. CCE, Delhi- 2014 (35) S.T.R. 544 (Tri. - Del.)

•

0.12 That except declaring about the transactions as required under the ER-I Returns, the Appellant was neither liable to disclose any other information to the Department nor the Central Excise Law creates any compulsion in this regard. Thus, the findings regarding wilfully suppression of facts were incorrect as these were made without any substantive basis and the impugned order to this extent liable to be set aside.

D.13 That the H on 'ble CESTAT in the case of Landis + G YR Ltd, vs. CCE,

11

File NO.APPL-COMMOCEXI312019-GST- APL-CHD

Kolkata- V 2013 (290) E.L. T 447 (Tri. - Kolkata) had held that the observation made by the department during excise audit could not be the standalone criteria for alleging suppression/malafide intention on the part of the assessee.

D .14 In the following cases, the Hon'ble Courts had categorically held that suppression could not be alleged merely on the basis of audit objections. The department had to bring any material on record to prove allegation of suppression to impose penalty: • The Lalit Ashok vs. CST - 2018 TIOL 3658-CESTAT-Bang. • Mis Shree Auro Iron Ltd. vs. CCE, Jaipur - ]018 (7) TMI 339 -

CESTAT New Delhi Gujarat Boron Derivatives P. Ltd. 115. C.C.E., C.& S.T.(A), Vadodara-Il- 2017 (348) EL T. 105 (Tri. - Ahmd.) Bhoruka Aluminium Ltd. liS. CCE & S. T., Mysore - 2017 (51) S. TR. 418 (Tri. - Bang.) GAC Shipping (India) Pvt. Ltd. vs. CCE & Cus., Cochin - 2017 (49) S. TR. 242 (Tri - Bang) D.25 Thus, the finding of suppression on the part of the Appellant was

patently incorrect and not tenable in law. The demand confirmed in respect ofSCN dated 19.0l.2017 and 29.12.2017 was wholly time-barred and thus, liable to be set aside. Non-declaration, if any, without any deliberate intention did not tantamount to suppression

D.15 That even if it was assumed without admitting that the Appellant was liable to pay amount as demanded by the department, the Appellant had not committed any positive act to suppress information from the department with the intent to evade reversal of Cenvat credit on common inputslinput services or payment of amount in terms of Rule 6(3) of the CCR. The Appellant had declared all the requisite details as per the statutory

;::~--:-.pr9visions. In this regard, reliance was placed on the following cases r"\).\

g:-;;'\I-( v~~~t:_:tin the Courts had taken a similar view in respect of invocation of ~)! . ~ext~~~~d period of limitation under Section llA of the Act:

u ( ,~ .~.§I d .. d ~\~%>"«<';>"l <im~~~j;/ a mmi Pro ucts v. CCE - 1989 (43) E.L.T. 195 (SC)

*.C:;;.I~·*. CCE v. Chemphar Drugs & Liniments - 1989 (40) E.L.T. 276 eSC) - • Gopal Zarda Udyog v. CCE - 2005 (188) E.L.T. 251 (SC)

• Lubri-Chem Industries Ltd. v. CCE - 1994 (73) E.L.T. 257 (SC)

•

•

•

D.16 The Appellant also relied upon the judgment of the Hon'ble Supreme Court in the ease of Mis Anand Nishikawa Co Ltd v. CCE, Meerut - 2005-TIOL JJ8-SC-CX,' case of Pad mini Products Limited v. CCE - 1989 (43) £.L. T

12


195 (SC)

D.17 That based on the reasons given above, finding given in the impugned order that the Appellant had wilfully suppressed the facts from the Department, with an intention to evade payment of amount under Rule 6(3) (i) of the CCR was incorrect. Hence, the extended period of limitation could not be invoked and the entire demand of Rs. 1,86,98,385/- and Rs. 1,85,22,1911- confirmed in respect of SCN dated 19.01.2017 and 29.12.2017 was time barred.

D.18 Without prejudice to above, it was submitted that in respect of SCN dated 29.12.2017, the Ld. Joint Commissioner had imposed penalty under Rule 15(1) of CCR read with Section 11 AC of the Act. Penalty under Rule 15(1) of the CCR can be imposed only in the situation where duty was not levied or paid or short levied or short paid for reasons other than of fraud, collusion, willful misstatement or suppression of facts. Thus, Ld. Joint commissioner had himself admitted that there was no fraud, collusion, suppression or willful misstatement, at least in respect of demand confirmed in respect of SCN dated 29.12.2017. Accordingly, extended period of limitation could not be invoked in respect of SCN dated 29.12.2017 and thus, demand of Rs. 1,85,22,191/- was anyways liable to be set aside.

(E) INTEREST WAS NOT CHARGEABLE AND PENALTY WAS NOT IMPOSABLE.

E. 1 That the Ld. Joint Commissioner had imposed penalty on the appellant ground on which extended period of limitation had been invoked.

E.2 That the Ld. Joint Commissioner had erred in confirming the demand of interest and penalty in the instant case. No Interest was recoverable since demand of amount as per Rule 6(3) of the CCR was unsustainable on merits. Thus, the demand of interest confirmed under Rule 14 of the CCR

r read with Section 11 AA of the Act was liable to be set aside on this ground alone. ~T ar a specific provision had been provided in the Explanation III to Rule

6(3) of the CCR for recovering the amount not paid in terms of Rule 6(3) of the CCR i.e. manner as provided in Rule 14 shall be followed for recovery of amount payable under Rule 6(3) of the CCR. However, similar explanation did not exist in the statute for recovery of the interest on the

13

- File No.APPL-COMMOCEX/3/2019-GST - APL-CHD ..

aforesaid amount. In the absence of such a provision in respect of interest on the amount not paid in terms of Rule 6(3)(i) of the CCR, interest on the said amount could not be recovered from the Appellant.

EA That without prejudice to submissions in the forgoing paras, it was submitted that in absence of a recovery provision, the demand of interest confirmed in the impugned order was legally not valid.

E.5 That the Appellant further submitted that a similar situation arose in context of Rule 57CC of the Central Excise Rules, 1944 (similar to the Rule 6 of the present CCR) wherein the Hon'ble Tribunal in the case of Pushpaman Forgings vs. CCE, Mumbai- VII - 2002 (149) E.L. T 490 (Tri. - Mumbai) had set aside the demand holding that in the absence of the machinery provisions for the recovery of the amount under the Act and the Rules, the amount of 8% cannot be claimed from the assessee. The said judgment has been upheld by the Hon'ble Supreme Court reported in 2003 (/53) E.L. T A89 (S. C.). The erstwhile provision contained in Rule 57CC which was in dispute in the said case was similar to Rule 6(3) of the CCR which was the subject matter of dispute in the present case. Under Rule 57CC also, the manufacturer who opted not to maintain separate accounts for inputs used in dutiable and exempted goods was required to pay an amount equal to 8% of the price of the exempted goods. Consequent to the aforesaid judgment, Rule 57CC was amended retrospectively vide the Finance Act, 2005 to provide for the recovery mechanism. The said provision existed even today as Explanation III to Rule 6 of the CCR.

E.6 Further, a similar situation was earlier experienced in the context of Section 11 D of the Central Excise Act, 1944. Dealing with the matter, the Hon 'ble Madras High Court in the case of Eternit Everest Ltd. vs. Union of India - 1997 (89) E.L. T. 28 (Mad.), while upholding the validity of Section lID however, quashed the demand and held that the proceedings in the nature of demand-cum-show cause notice were without jurisdiction and the

•.•.. ~'

~7f\

~

,,\"f ' against the said judgment was dismissed by the Hon 'ble Supreme Court as

)

\)' withdrawn, vide 2002 (141) E.L.T A285 (S.C.). Consequent to the said \\~-"o<rRl judgment, Section lID was retrospectively amended vide the Finance Act,

*.~' 2000 to provide for the recovery mechanism for enforcing the demand ., ..c-:.::?

under Section 11 D.

demand was not enforceable due to lack of any machinery provisions for assessment of adjudication of a claim. The appeal filed by the Department

E.7 That the Appellant submitted that the ratio of the aforesaid judgments were squarely applicable to the facts of the present case. Thus, in the absence of such a provision in respect of interest on the amount not paid in terms of

14

File NO.APPL-COMMOCEX/3/2019-GST- APL-CHD

Rule 6(3)(i) of the CCR, the demand confirmed in the impugned order w.r.t. interest was liable to be set aside.

E.8 That in the impugned order, the Ld. Joint Commissioner had imposed penalty on the ground that the Appellant had suppressed the material facts from department and that it was only upon Audit that facts of the instant case came to the knowledge of the department. In this regard it was submitted that for the reasons given in the foregoing paragraphs, the penalty demanded in the present case was not sustainable in law. Once the demand is found to be non-sustainable, the question of levy of penalty did 110t arise. Reliance placed on the case of CCE v. H.M.M. Ltd.- 1995 (76) E.L. T 497 (SC); case of CCE, Aurangabad v. Balakrishna Industries - 2006 (201) E.L.T 325 (SC) which had been followed in several cases.

E.9 Therefore, the penalty imposed on the Appellant was legally unsustainable and the same was liable to be set aside.

E. 10 That the Appellant had always acted in good faith and in bonafide belief that the there was no implications under Rule 6(3) of the CCR. Tn this regard, reliance placed on the decision of the Hon 'ble High Court of Madhya Pradesh in case of Comm. of Cus. & c. Ex., BhopaL vs. Bhilai Jaypee Cement Plant - 2015 (320) E.L.T 730 (M.P); case of Hindustan Steel Ltd. vs. The State of Orissa - AIR 1970 (SC) 253. Following the judgment of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. (supra), in the case of Cement Marketing Co. of India Ltd. vs. Assistant Commissioner of Sales Tax - 1980 (6) EL T 295 (SC), Hon 'ble Supreme Court had held that penalty could not be imposed when an assessee raises a contention of bonafide.

E.l1 That the conduct of the Appellant in the present case was totally bona fide and therefore the imposition of penalty was not sustainable. Without prejudice to submission on merits penalty could not be recovered in absence of provisions imposing the penalty. In this regard the submissions as made in the preceding paras in respect of interest were also relevant for

=- __ non-imposition of penalty. ~23 - T!1at without prejudice to above, it was submitted that penalty could not be t. • imposed on the Appellant under Rule 15(2) of the CCR read with Section

11 AC of the Act, as imposed in respect of SCN dated 19.0 l.2017 and thus, ::'~ thL~riod relevant in respect of Rule 15(2) of the CCR was 01.04.2013 to

___.-:;- .03.2015. E.24 That neither there was allegation of fraud, wilful misstatement and

collusion in the SCNs nor there was any finding given by the Ld. Joint Commissioner on the same. In this regard, it was submitted that the since

]5


the Appellant had availed only admissible Cenvat credit as explained out in the forgoing grounds, there was no contravention of Rule 6 of the CCR. Further, the words 'with intent to evade payment of duty' in Rule 15(2) of the CCR and Section 11 AC of the Act make it loud and clear that intention of evading duty payment was crucial for imposition of penalty. In the present case, since the department itself had not given any finding regarding contravention of Rule 6(3)(i) with any malafide intention, penalty could not be imposed on the Appellant under Rule 15(2) of the CCR read with Section llAC of the Act.

E.25 That there was no suppression on part of the Appellant as the ingredients of Rule 15(2) of the CCR, Section 11 AC (i.e. penalty) of the Act and Section 11 A( 4) (i.e. extended period of limitation) of the said Act were same. That the Appellant had declared the said details in the periodic monthly ER - I returns. Thus, there was no suppression on the part of the Appellant. There was no finding that showed any positive act of wilful suppression on the part of the Appellant. It was settled law that penalty under Rule 15(2) read with Section llAC could not be imposed when the Department was aware of the facts. Thus, there was no suppression by the Appellant.

E.26 In light of aforesaid submissions, penalty imposed on the Appellant under Rule 15(2) of the CCR read with Section 11AC of the Act was liable to be set aside. Without prejudice to above, penalty, if any imposable, cannot exceed 50% of the demand liable to be confirmed, in terms of proviso to Section 11 AC (1)( c) of the Act.

E.27 Without prejudice to above, if it was assumed without admitting that the provisions of Section llAC of the Act were attracted in the instant case, penalty could not exceed 50% of the demand liable to be confirmed, if any, as provided under proviso to Section 11AC(l)(c) of the Act. This was for the reason that the SCNs were issued in pursuance of excise audit conducted by the department and the information pertaining to the issues raised in the SCNs, was available in the records of the Appellant and the peri od covered under the impugned SCN s was between year 2013 -14 to

~01.04.2015, i.e. subsequent to 07.04.2011 but before the date of which 1/',4\;;,,':' " Finance Act 2015 received the assent of the President i.e. 14.05.2015.

l(ft~~{ . r(" Ther~fore, the Appellant was eligible for the benefit of reduced penalty of ~.<~ _ ,500,:0 of demand confirmed, if any, in terms of the proviso to Section '~ 11 AC(1 )(c) of the Act. ~4'8 - . h{ Ld. Joint Commissioner had also imposed penalty under Rule l5( 1) of

the CCR read with Section 11AC of the Act in respect of SCN dated 29.12.2017 and 28.03.2018 covenng period from 0l.04.2015 to

16


30.06.2017, whereas it was evident from the provisions that penalty under Rule 15(1) of CCR read with Section llAC of the Act could be imposed only in the cases where the duty had been short paid or short levied for the reasons other than by way of fraud, collusion, wilful misstatement or fraud. Thus, Ld. Joint Commissioner, by imposing penalty under Rule 15( 1) of the CCR had admitted that there had been no suppression of facts by the Appellant and had given an order to impose penalty under Rule 15 (1) of CCR contrary to the finding that the Appellant had suppressed the material facts.

E.29 Further, the Ld. Joint Commissioner had also erred in quantifying the penalty in the impugned order. The maximum penalty which could be imposed under Rule 15(1) of the CCR read with Section 11 AC of the Act was ten percent of the duty determined. In the instant case, the demand of duty confirmed by the Ld. Joint commissioner in respect of SCN dated 29.12.2017 and 28.03.2018 was Rs 2,59,48,714/-. Thus, the maximum penalty which could have been imposed on the Appellant was Rs. 25,94,871.401- i.e. 10% of Rs. 2,59,48,714/-. However, the Ld. Joint Commissioner had imposed a penalty equal to the amount of demand confirmed i.e. Rs. 2,59,48,714/-. It was clearly evident that the impugned order passed by the Ld. Joint Commissioner was without application of mind and appreciating the correct legal position.

8. Personal hearing in the case was held on 03.09.2019 which was attended by Sh. Tarun Sharma, C.A., Sh. Ashutosh Gupta, G.M. Legal and Internal Audit & Sh. Ranjit S. Chahal, Manager Taxation as authorized representatives on behalf of the company. During the course of personal hearing, they reiterated the su bmissions, as made in their grounds of appeal dated 22.01.2019 and filed additional brief of compilation of the relevant provisions & various judgments related to the issue and requested to decide the case taking these into consideration. Thereafter, vide their letter dated 09.10.2019 the appellant filed some additional submissions as appended below:

);> That in furtherance to the submissions made 111 the appeal memo and during hearing, it was submitted that vide Notification No. 13/2016 - C.E. (N.T.) dated 01.03.2016, the legislature had inserted a new sub-rule (3AA)

-to ule 6 of the CCR, w.e.f. 01.04.2016 which provide that a manufacturer ~-"~ ~ a provider of output service who had failed to follow the procedure of

giving prior intimation, may be allowed by a Central Excise officer, competent to adjudicate such case, to follow the procedure and pay the

17

File NO.APPL-COMMOCEX/3/2019-GST- APL-CHD

amount prescribed subject to payment of interest calculated at the rate of fifteen percent per annum.

);;> That in furtherance to the submissions in the appeal memo, it was submitted that in respect of common input services for the period from April 2016 to March 2017, the Appellant availed the admissible Cenvat credit attributable to dutiable turnover on proportionate basis only. The Appellant computed the amount of admissible Cenvat credit on common input services, based on the actual turnover of the financial year 2016-17 only. In this regard, the Appellant submitted letter dated 02.01.2017 (enclosed on Page 217 of appeal memo) and letter 30.06.2017 (enclosed on page 228 of appeal memo) to the department. Thus, the Appellant had never availed the Cenvat credit on common input services used in the manufacture of exempted goods. Thus, effectively, the Appellant had complied with and had followed the procedure laid down in Rule 6(3A) of the CCR.

);> That even if it was assumed for sake of discussion that the Appellant did not follow the procedure of filing prior intimation to the department, as held in the Impugned order, the said requirement could be dispensed by the Ld. Joint Commissioner as the Appellant did not avail any inadmissible Cenvat credit on common input services during the relevant period. Thus, the demand confirmed in the Impugned order was anyway liable to be set aside considering Rule 6(3AA) of the CCR. Further, no interest can be demanded from the Appellant as admissible Cenvat credit pertaining to dutiable turnover was availed on actual turnover basis only. Hence, the demand confirmed in the Impugned order was liable to be set aside.

9. I have gone through the details of the SCN, the 0-1-0 passed by the adjudicating authority, the grounds of appeal and the submissions made by the appellant at the time of personal hearings and thereafter. The main issue to be decided in this case is whether or not the appellant are entitled to Cenvat Credit in terms of the provisions of Rule 6 (3) of the CCR?

10. I find that the Appellant are engaged in the manufacture of Medicaments,

It niections and Capsules (Anti Cancer) falling under Chapter Heading No. 30.04 -p,)'1 ..

of the CETA. During the course of audit it was observed that the appellant was r availing Cenvat Credit on the common inputs & input services used in the ~i: .manufacture of the dutiable as well as exempted finished goods in contravention

~ to the ~ovisions of Rule 6 of the Cenvat Credit Rules, 2004. Thereafter, Show - use Notice dated 19.0 l.20 17 covering the period April 2013 to March 2015

18


, ro llowed by two statements dated 29.12.2017 & 28.03.2018 for the periods April • 20 l5 to March 2016 and April 2016 to June 2017 respectively, were issued to them for recovery of a total demand of Rs 4,46,47,099/- for the period from April, 2013 to June, 2017. The adjudicating authority vide the impugned order had confirmed the said demand alongwith recovery of interest and imposed penalties thereon. Aggrieved, the appellant have preferred appeal with the appellate authority on the grounds discussed in the preceding paras.

11. In this regard I observe that i r any person is engaged in manufacturing exempted goods or rendering exempted services along with the taxable service or goods then assessee has to determine the amount of CENVAT Credit utilized for taxable goods or services. There are three options available under the following rules to do so:

A) Rule 6(2) of CCR, 2004 The manufacturer or provider of output service for availing CENVAT

Credit shall maintain separate accounts for the receipt, consumption and inventory of inputs & use of input services used:

(i) in or in relation to the manufacture of exempted goods; (ii) in or in relation to manufacture of dutiable final products excluding

exempted goods;

(iii) for the provision of exempted services;

(iv) for the provision of output services excluding exempted services. and shall take CENVAT credit only on inputs & input services under clauses (ii) and (iv).

8) Rule 6(3)(i) of CCR, 2004

The manufacturer of goods or the provider of output service shall pay an amount equal to six per cent of value of the exempted goods and exempted services. In case of services by way of transportation of goods or passengers by rail, the service provider shall pay only two per cent on the vaLue of service so exempted.

The amount paid under this rule shall be deemed to be CENVA T credit not nl<'\ ~rlte; '.r~r the purpose of exemption notification where part of the value of a

taxable service has been exempted on the condition that no CENVA T credit of inputs 0; input services shall be taken. In such cases, 6% shall be paid on the

~ .: value ~o exempted under the notification.

G ~R,fIe 6(3A) of CCR, 2004

Under this rule, an assessee shall reverse or pay the proportional amount

19


0/ CENVAT credit availed, every month on provisional basis, which will be considered as utilized for the provision or manufacture of exempted service or goods respectively. Such reversal or payment shall be made by 5,11 of the following month or quarter as the case may be.

For Compliance under Rule 6(3A) the assessee is required to submit following details to the jurisdictional Superintendent of Central Excise:

• Intimation of choosing this option along with the details of its taxable & exempted service, date of exercising such option and the balance lying in the account of CENVA T Credit on that day.

• At the end of the financial year, the assessee shall submit the amount of CENVA T Credit computed on provisional basis and on the actual basis and the treatment of difference between the two along with the proof of pay ment, if any, within 15 days from the date of payment or adjustment of CENVA T Credit account.

• Once an option is opted by an assessee, it shall be exercised on all the ex empted goods manufactured or services provided and shall not be with drawn during the remaining part of the financial year.

• In terms of Rule 6(3) (ii), with respect to inputs, an assessee can maintain separate accounts for inputs used for manufacturing taxable & exempted goods and take CENVAT credit on inputs used for taxable goods. While with respect to input services, assessee can payor reverse CENVAT Credit as provided under Rule 6(3A) ibid.

Besides, there are exceptions to Rule 6 of CCR, 2004: In certain cases, assessee can avail 100% of CENVAT Credit on inputs or

input services or capital goods even if the assessee is engaged in providing exempted services or manufacturing exempted goods along with taxable services or goods. The provisions of Rule 6 shall not apply in the following cases:

• 1n case the excisable goods, where goods are removed without payment of duty to:

);> Cleared to a unit in SEZ or developer of SEZ, software technology park,' Cleared for exports under bond,' Cleared to 100% EOU,'

?' I Cleared for Solar power generation project,' .Gold or Silver falling under the Chapter 71 of the First Schedule arising in the course of manufacture of copper or zinc,' Supplied to UN or an international organization or foreign diplo matic missions or consular missions for their official use

20


In case of taxable services, where services are rendered without payment of service tax to a unit in SEZ or developer of SEZ or when services are ex ported.

• These rules shall not apply to persons who are liable to pay service tax as service receiver under reverse charge mechanism. For example: A person is manufacturing dutiable goods and has used services by way of trans portation of goods by road on which he has to pay service tax, on 25% of the total value of the service, as a service recipient. Then, he shall not be required to reverse or pay CENVAT Credit utilized for manufacturing tax able goods even though he had paid service tax on the abated value of the service.

• Further, CENVAT Credit on Capital Goods is not restricted where a person is providing taxable & exempted services or manufacturing dutiable or exempted goods together. But no credit shall be allowed where assessee deals in exempted services or goods only.

12. From the above it is quite clear that there are set of guidelines provided in the statute which are mandatory for every assessee to comply. In this regard I find that apropos to the audit by the department, three SCN/Statements of Fact have been issued to the appellant covering the period w.e.f. April 2013 to June 2017 alleging contraventions of provisions of Rule 6 of the CCR. Whereas the appellant has pleaded that they had been correctly availing the Cenvat credit on the eligible goods and services pertaining to dutiable goods only, for which they have been maintaining separate accounts for the both dutiable as well as exempted goods manufactured by them. Further, they have been availing Cenvat credit attributable to their dutiable turnover only on the basis of invoices issued by their ISD enclosing therein the calculations showing quantum of Cenvat credit available to them and further have not availed Cenvat credit on any inputs or input services used in or in relation to the manufacture of exempted final products. In this regard I find that the entire case of the department is based on the allegation levelled in the show cause notice that appellant had been manufacturing both dutiable as well as exempted goods without segregating the same in records, as envisaged under Rule 6 of the CCR, hence cannot utilize the credit of the tax payable but the department has missed the major submission of ~~ppellant that during the period in question, they did not avail any credit ~;. (f' r~lating~o the exempted goods. Moreover, initially, their ISD had been passing on

\~"l the credit only relating to the dutiable goods and it was only during the period .", ( )

:"c..~o when- they started availing credit of the common inputs used in the dutiable as , •••• ~ "'I

~s the exempted goods that the question of maintaining separate records etc came into fore. The appellant's submission that even after taking the credit entry

•

21


,f, the statutory records of the company they made the proportionate reversal of the credit pertaining to the exempted services on the same day was never taken into consideration by the adjudicating authority. The plea of the appellant is tenable in so far as the facts should have been thoroughly examined by the jurisdictional central excise authorities before issuance of the notice to the appellant. Reliance placed on the decision of the Hon'ble Bombay High Court Bench in the case of Commissioner Vs Ciron Drugs & Pharma P Ltd reported as 2018(14) GSTL J73 (Bom.) which reads as under:

"The Appellate Tribunal in its impugned order had relied upon the deci sion in Shahyadri Starch Industries P Ltd. case [Final Order No. A/85556/2016-WZBIEB, dated 4-2-2016} and held that in a case where the assessee was manufacturing dutiable as well as exempted goods and failed to maintain separate account of inputs used in manufacture of both type of goods, demand of an amount equal to 10% of the value of exempted goods was not sustainable as they had reversed proportionate Cenvat credit on input services attributable to exempted goods and also paid interest, even though they had not filed declaration under Rule 6(3) of Cenvat Credit Rules, 2004 ':

Further, the Hon 'ble High Court of Bombay in the case of Commissioner of Central Excise, Mumbai Vs IVP Ltd. reported as 2017 (349) ELT 18 (Bom.) has also observed as under:

"Cenvat credit - Inputs - Common inputs used in dutiable and exempted goods - Reversal of proportionate credit - In view of retrospective amendment to Rule 6 ofCenvat Credit Rules, 2002 by Finance Act, 2010, even if assessee had failed to maintain a separate account was entitled to reverse proportionate Cenvat credit - Option of paying an amount equal to 10% sale value of exempted goods, therefore, could not have been enforced on assessee.

The High Court of Gujarat in the case of Commissioner Vs Unimed Technologies Ltd reported as 2016 (339) ELT A 52 has observed that:

{;~/~~~~,([he Appellate Tribunal in its impugned order had held that in view of de- II?~ ._ hSLOn of Larger Bench in 2008-TIOL-614-CESTAT-MUM, since appellant ( • -..> has reversed proportionate credit attributable to exempted inputs prior to \ .•.. e-'t'.<f.. . removal of goods, payment of amount as envisaged in Rule 6(3)(b) of Cen-

, .? • C? n vat Credit Rules, 2002 was not required on non-maintenance of separate

i<tr ~~ =r records for common inputs used in dutiable and exempted goods."

22

• ~ File No.APPL-COMMOCEX/3/2019-GST- APL-CHD

• s As such, in view of the legal interpretations adopted by various courts • across the country vis a vis the submissions of the appellant with regard to the reversal of proportionate credit on the common inputs used in the manufacture of dutiable & exempted goods, no case of contravention of provisions of Rule 6 of the CCR appears to be made out against the appellant. The finding of the adjudicating authority in the impugned order hence is liable to be set aside.

13. The appellant in their appeal has also pleaded that the fact of availment of Cenvat credit was duly in the knowledge of the department as they have been declaring the same in the periodical returns i.e. ER I returns filed, hence, the demands were time barred. T find that the Hon 'ble Supreme Court of India in the case of Commissioner Vs Goyal Proteins Ltd reported as 2017 (355) ELT A 27 (SC) has observed that:

"Demand of 8%/10% value of exempted goods under Cenvat Credit Rule 6(3) - Extended period of Limitation not invokable of clearances of ex empted and dutiable goods shown in monthly returns (2) Cenvat credit - Demand of 8%/10% vaLue of exempted goods under Cenvat Credit Rule 6(3) - Reversal of credit on inputs used in manufacture of dutiable and exempted goods sufficient"

As such, in view of the decision of the Apex court as well as when the matter was already in the knowledge of the department and the due amounts already reversed by the appellant, T find that the adjudicating authority has erred in confirming the demand against the appellant and the impugned order is liable to be set aside. Moreover, the appellant in the subject appeal have furnished copy of letters dated 02.0 l.20 17 & 30.06.2017 regarding availment of Cenvat credit only on the portions admissible to them and have never availed credit on the common inputs used in the manufacture of the exempted goods, in compliance to the requisites of provisions of Rule 6(3) of the CCR. Hence in view of the above, the appeal of the appellant deserves to be allowed by setting aside the impugned order.

14. In view of the above, the appeal of the Appellant is allowed and the impugned order is set aside. The appeal is disposed of, accordingly.

Digitally signed by SUMAN BALA Date:Mon Oct 28 13:04:51 1ST 2019

Reason :APprove~"""~,,....- __

(D~S~~~LA) COMMISSIONER (APPEALS)

23

- ,

" File No.APPL-COMMOCEX/3/2019-GST - APL-CHD

• (J<:GD.A.D. / Mis. Fresenius Kabi Oncology Ltd. (Formerly known as Mis. Dabur Pharma Ltd.) 19, HPSIDC, Indl. Area, Baddi, Distt. Solan, (H.P.).

Copy to:

1. The Chief Commissioner (CZ), Central Goods & Se ice Tax, Chandigarh.

2. The Commissioner, Central Goods & Servic Tax Commissionerate,

Shimla.

3.

4.

The Assistant Commissioner, Central Goods & ervice Tax Division, Baddi

SUPEmNT~~:~:) AL

Guard file.

24

Documents

13 --tr!·('~fJ.~-qS~L) -! ).~ ~ ~~