Commissioner Of Central Excise And Service vs. M/S Manindra And Mahindra LTD Jaipur
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The appellant, Commissioner of Central Excise and Service Tax, Jaipur, appealed a tribunal order that reversed a decision by the CIT(A). The respondent, M/s. Mahindra and Mahindra Ltd. (FES), manufactures tractors with engine capacities exceeding and not exceeding 1800 cc. Tractors with an 800 cc engine capacity are fully exempted from Central Excise duty, while those exceeding 1800 cc are still leviable to Motor Cess/tractor Cess at 1/8%. The core issue revolves around the respondent's compliance with Rule 6(2) and 6(3) of the Cenvat Credit Rules, 2004, specifically regarding the maintenance of separate accounts for inputs used in manufacturing dutiable and exempted goods, and the subsequent reversal of Cenvat credit.
Held
The Court held that the tribunal had not committed any error in allowing the appeal of the assessee. The Court agreed with the tribunal's finding, relying on Supreme Court decisions. The distinction sought to be made by the revenue was not pointed out before the tribunal, making it difficult to hold that the tribunal committed a serious error. Therefore, the issue was answered in favor of the assessee and against the department. The Court found no ground to uphold the contention of the revenue regarding the non-utilization of Cenvat credit for certain periods, particularly when the assessee had taken a specific stand about not making credit entries or reversing them. The Court noted that if the assessee is to have the benefit of no liability, it must follow the formula provided under Rule 6(3A) of the Cenvat Credit Rules. The judgment referred to the Gujarat High Court's decision in Shree Rama Multi Tech Ltd. v. Union of India, which considered a similar situation regarding the adjustment of credit when final products are exempted.
Key Issues
1. Whether, in the event of non-maintenance of separate accounts by the assessee as required under Rule 6(2) of the Cenvat Credit Rules, 2004, a reversal of Cenvat Credit subsequent to the clearance of exempted goods constitutes sufficient compliance with Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant contended that the respondent failed to maintain separate accounts for inputs used in manufacturing dutiable and exempted goods. The respondent argued that a subsequent reversal of Cenvat credit was sufficient compliance. The appellant relied on decisions in Chandrapur Magnet Wires (P) Ltd. vs. Collector of Central Excise, State of Jharkhand & ors. vs. Ambay Cements & Anr., and M/s. Amrit Paper vs. Commissioner of Central Excise, Ludhiana. The respondent's arguments are not explicitly detailed but are implied to be in favor of the tribunal's decision.
Sections Cited
Rule 6(2), Rule 6(3), Rule 6(3A)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Judgment 21/02/2018
By way of this appeal, the appellant has assailed the judgment and order of the tribunal whereby tribunal has allowed
the appeal of the assessee and reversed the view taken by the CIT(A).
This court while admitting the appeal on 27.9.2016 framed following substantial question of law:- “A. Whether, in the event of non-maintenance of separate accounts by the assessee, as required u/r 6(2) Cenvat Credit Rules, 2004, a reversal of Cenvat Credit subsequent to the clearance of exempted goods was sufficient compliance of Rule 6(3) of Cenvat Credit Rules, 2004.”
Counsel for the appellant has contended that respondent is manufacturing tractors of engine capacity exceeding 1800 cc and (2 of 48) [EXCIA-49/2016] less than 1800 cc. The tractors which are subject matter of 800 cc are totally exempted from CEX duty, however Motor Cess/tractor Cess @ 1/8% is continued to be leviable on the tractors of engines capacity exceeding 1800 cc.
1 Counsel for the appellant has taken us to the provisions of Rule 6 (2) & (3) of Cenvat Credit Rules, 2004 which reads as under:- Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) Notwithstanding anything contained in sub- rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:- (a) If the exempted goods are- (i) to (vii)
(3 of 48) [EXCIA-49/2016] the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six percent. of value of the exempted services; or (ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specifiedin sub-rule (3A).
Counsel for the appellant has relied upon the following decisions:-
1 ELT 3 (SC), it has been held as under :-
It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under:
The credit account under MODVAT rules may be maintained chapter wise. MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products,
(4 of 48) [EXCIA-49/2016] final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all inputs used in the manufacture of the final products, provided that credit of duty paid on the inputs used in such exempted products is debited in the credit account before the removal of such exempted final products. The circular deals with a case where the manufacturer produces dutiable final products and also final products which are exempt from duty and it is not reasonably possible to segregate inputs utilised in manufacture of the dutiable final products from the final products which are exempt from duty. In such a case, the manufacturer may take credit of duty paid on all the inputs used in the manufacture of final products on which duty will have to be paid. This can be done only if the credit of duty paid on the inputs used in the exempted products is debited in the credit account before the removal of the exempted final products. In view of the aforesaid clarification by the Department, we see no reason why the assessee cannot make a debit entry in the credit account before removal of the exempted final product. If this debit entry is permissible to be made, credit entry for the duties paid on the inputs utilised in manufacture of the final exempted product will stand deleted in the accounts of the assessee. In such a situation, it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final exempted product under Rule 57A. In other words, the claim for exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of the duty paid on the inputs used in manufacture of these goods.
2 In State of Jharkhand & ors. vs. Ambay Cements & Anr. in Appeal (Civil) No.7944/2003 decided on 17.11.2004 wherein it has been held as under:-
(5 of 48) [EXCIA-49/2016] In our view, the failure to comply with the requirements renders the writ petition filed by the respondent liable to be dismissed. While mandatory rule must be strictly observed, substantial compliance might suffice in the case of a directory rule. Whenever the statute prescribes that a particular act is to be done in a particular manner and also lays down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of the interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance of the same must result in canceling the concession made in favour of the grantee-the respondent herein. For the foregoing reasons, we hold that the High Court has erred in allowing the writ petition filed by the respondent herein and directing the grant of exemption in favour of the respondent. We, therefore, have no hesitation in setting aside the judgment and order passed by the High Court and allowing this appeal.
3 In M/s. Amrit Paper vs. Commissioner of Central Excise, Ludhiana in Appeal (Civil) 4891/2005 decided on 25.7.2006 wherein it has been held as under:- It is important to note that the underlying object behind the notification was to utilize the credit against payment of duty on the final product. In the circumstances, the demand for differential duty, penalty and confiscation subject to payment of redemption fine is valid and justified. As rightly submitted by learned Counsel for the respondent the provisions of Rule 57C would be rendered nugatory and redundant if (6 of 48) [EXCIA-49/2016] the interpretation as suggested by learned Counsel for the appellant is accepted. It would mean that primacy has to be given to the Notification over the statutory provisions contained in Rule 57C. Rule 57C reads as follows: 57C. Credit of duty not to be allowed if final products are exempt. - No credit of the specified duty paid on the inputs used in the manufacture of a final product (other than those cleared either to a unit in a Free Trade Zone or to a hundred per cent Export-Oriented Unit) shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty.
It provides in mandatory and categorical terms that no credit of the specified duty paid on the inputs used in the manufacture of a final product (of the enumerated categories) shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Moreover on the facts of the case it is found that the manufacturer had availed of the credit at the time of the clearance of the goods and had suo moto reversed it to avail the exemption later on almost after 11 months when it claimed refund of modvat-credit, hence it was not entitled to exemption. Undisputedly factual position is so. Moreover, on the facts of the case, it is found that the manufacturer had availed of the credit at the time of the clearance of the goods and had suo motu reversed it to avail the exemption later on almost after 15 months when it claimed refund of Modvat credit, hence it was not entitled to exemption. Though the decision in Orissa Extrusions's case (supra) supports the stand taken by the appellant, but in view of what has been stated by a three-Judge Bench in (7 of 48) [EXCIA-49/2016] Ichalkaranji's case (supra) the decision does not lay down the correct position in law. In that view of the matter, the present appeal is sans merit and is dismissed. No costs.
4 In Commissioner of Central Excise, New Delhi vs. M/s. Hari Chand Shri Gopal & ors. etc. in Civil Appeal Nos.1878-1880 of 2004 decided on 18.11.2010 wherein it has been held as under:-
Rule 196 provides for payment of duty by the recipient if the goods obtained under Rule 192 are not accounted for or used in the manner prescribed under these rules. Similarly, Rule 196A stipulates that surplus goods so received under Rule 192 can be cleared on payment of duty. Rule 196AA provides for transfer of such goods received under Rule 192 to another manufacturer who has been granted registration under Rule 192 with the prior approval of the proper officer. Rule 196B provides for the manner in which goods received under Rule 192 may be disposed of if found defective or damaged, they can be returned to the original manufacturer and such returned goods shall be added to the original manufacturer and such returned goods shall be added to the non-duty paid stock of the original manufacturer. Finally, Rule 196BB provides for movement of goods received under Rule 192 as such, or after partial processing outside the factory for repair and return. The applicant, though registered under Rule 174, can receive the remitted goods for use in special industrial purpose only if it gets an endorsement to that effect on the Registration Certificate, so given in Form R-2, in advance which in this case was obtained only on 22.10.1996, after the event. Further, Column 5 of Schedule of R-1 certificate clearly enjoins upon the recipient unit to furnish additional information viz. description of goods to be obtained for industrial purpose, estimate quantity in the year, details of the supplier of the goods etc. Further, it is on the basis of R-2 Certificate, the juri ictional Range Officer issues a CT-2 certificate (Certificate for Transfer of Goods) under the cover of which the remitted goods
(8 of 48) [EXCIA-49/2016] have to move from the supplier unit to the recipient unit. CT-2 certificate is required to be shown to the supplier unit who shall mention the CT-2 number on the Gate Pass before delivering the goods without payment of duty on the strength of CT-2 certificate. Compliance
of the above mentioned requirements,
stipulated
in Chapter X, is a pre-requisite for getting exemption from the remission of excise duty on the specified goods. Exemption Clause - Strict Construction
The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption. In Novopan Indian Ltd. (supra), this Court held that a person, invoking an exception or exemption provisions, to relieve him of tax liability must establish clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the (9 of 48) [EXCIA-49/2016] notification, i.e., by the plain terms of the exemption.
Of course, some of the provisions of an exemption notification may be directory in nature and some are of mandatory in nature. A distinction between provisions of statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished. In Tata Iron and Steel Co. Ltd. (supra), this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, therefore, deserves a strict construction, although construction of a condition thereof may be given a liberal meaning if the same is directory in nature. DOCTRINE OF SUBSTANTIAL COMPLIANCE AND `INTENDED USE':
The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the "essence" or the "substance" of the requirements. Like the concept of "reasonableness", the acceptance or otherwise of a plea of "substantial compliance" depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for (10 of 48) [EXCIA-49/2016] which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means "actual compliance in respect to the substance essential to every reasonable objective of the statute" and the court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non- compliance of directory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential.
(11 of 48) [EXCIA-49/2016]
We have already indicated that, at the supplier end, no registration under Rule 174 was obtained and no records were kept. The applicants, at the recipient end, were also legally obliged to give various declarations in the statutory forms so as to claim exemption and such declarations admittedly were not made. Non-compliance of those conditions enumerated under various rules in Chapter X of the Excise Rules and non-furnishing of various statutory forms prescribed under Chapter X, in our view, are fatal to a plea of substantial compliance and intended use. The respondents, therefore, on the facts of this case, have not succeeded in establishing the plea
of "intended
use"
or "the substantial compliance" of the procedure set out in Chapter X so as to claim the benefit of the exemption notification dated 11.8.1994. 31. Civil Appeal No. 1631 of 2001 arises out of the Order dated 1.12.2000 passed by the Tribunal at New Delhi. The issue involved in that case is whether the exemption from the payment of central excise duty was available to the populated Printed Circuit Board (PCB), manufactured and cleared by the assessee under Notification no. 48/94-CE dated 1.3.1994. The Tribunal found that the assessee was not eligible for the benefit of the notification since the assessee had not followed the procedure set out in Chapter X of the Excise Rules by clearing PCB from their unit to the central store at A-11, Okhla Industrial Area, Phase 1, New Delhi. The Tribunal held that, under Chapter X, the assessee who wanted to avail of the benefit of exemption notification had to file application in Form AL- 6 to the juri ictional Central Excise authorities and had to obtain L-6 licence and had to follow the other procedures laid down in that chapter which, in our view, are mandatory requirements for claiming the exemption from duty in the light of the principles discussed by us in the other appeals. On facts as well as on law, we fully endorse the view taken by the Tribunal and the appeal would stand dismissed.
(12 of 48) [EXCIA-49/2016]
Counsel for the respondent has supported the order of the tribunal and he also relied on para no.4,5 &6 wherein it has been held as under:- “4. We have heard both the sides and examined the appeal records. The point for decision in this appeal is whether or not the appellants are liable to pay an amount equal to 10% of the value of tractors of engine capacity below 1800 cc when they have availed Cenvat Credit of educational cess on common inputs without maintaining separate records. We have perused the impugned order. The Original Authority observed that industrial cess and education cess being paid are in the nature of excise duty only. The appellants have to maintain separate accounts for receipt and consumption of the inputs which are common for different type of tractors. Since the appellants failed to do so they are liable to pay 10% of the total price of exempted final products. First of all, we noticed that in the present case there is no credit of Central Excise duty availed by the appellants on the common inputs. The only credit availed is education cess paid on such common inputs. The final products are of two categories-tractors with engine capacity of above 1800 cc or below 1800 cc. Industrial cess is leviable on the tractors with capacity of above 1800 cc. Education cess is payable on such industrial cess. The appellants utilized the credit of education cess availed on inputs to discharge education cess on tractors of above 1800 CC. There is no industrial cess or education cess on the tractors of below 1800 CC. Accordingly they calculted the proportionate credit of education cess availed on common inputs and reversed the same. We find there is no dispute on the fact of such reversal which has been admitted in the show cause notice itself. In spite of such reversal, the appellants were called upon to pay an amount equal to 10% of the total price of exempted tractors invoking Rule 6(3)(b) of the Cenvat Credit Rules, 2004. We find such a demand is not legally sustainable as already held in various decisions of this Tribunal and as affirmed by the Hon’ble Supreme Court.
(13 of 48) [EXCIA-49/2016]
The Hon’ble Supreme Court in credit availed earlier it will amount to non- availment of such credit. We find though the Original Authority examined the said decision of the Hon’ble Supreme Court he Pune-I reported in 2015 (40) STR 381 (Tri. Mumbai). The above 1800 cc. Education cess is payable on such industrial cess. The appellants utilized the credit of education cess availed on inputs to discharge education cess on tractors of above 1800 CC. There is no industrial cess or education cess on the tractors of below 1800 CC.
Accordingly they calculated the proportionate credit of education cess availed on common inputs and reversed the same. We find there is no dispute on the fact that such reversal which has been admitted in the show cause notice itself. In spite of such reversal, the appellants were called upon to pay an amount equal to 10% of the total price of exempted tractors invoking Rule 6 (3) (b) of the Cenvat Credit Rules, 2004. We find such a demand is not legally sustainable as already held in various decisions of this tribunal and as affirmed by the Hon’ble Mumbai-II reported in 2000 (120) E.L.T. 792 (Tribunal-LB), the Tribunal held reversal of Modvat credit taken with regard to inputs if reversed the manufacturer could
(14 of 48) [EXCIA-49/2016] 2004 (174) E.L.T. 422 (All.), the Hon’ble High Court of Allahabad held that reversal of credit made even subsequent to the clearance of final products is sufficient compliance to conclude that no credit was taken. In CCE & CUS vs. Precot Meridian Ltd. reported in 2015 (325) E.L.T. 234 (S.C.), the Hon’ble Supreme Court confirmed the view of the Tribunal in Franco Italian Co. Pvt. vs. CCE, Mumbai-II (supra) and Hon’ble Allahabad High Court decision in of India (supra). This decision of the Hon’ble Supreme Court is the latest in the series of decisions by the Tribunal, Hon’ble High Court and the Hon’ble Supreme Court on this matter.
In view of the legal position as held in the various judicial pronouncements, as above and the analysis made herein above, we find that the impugned order is not legally sustainable. Accordingly, the same is set aside and the appeal is allowed.”
1 He has taken us to the provisions of Cenvat Credit Rules, 2004 for the assessment year 2004-05 which reads as under:- Rule 1. Short title, extent and commencement.- (1) These rules may be called the CENVAT Credit Rules, 2004. (2) They extend to the whole of India: Provided that nothing contained in these rules relating to availment and utilization of credit of service tax shall apply to the State of Jammu and Kashmir. (3) They shall come into force from the date of their publication in the Official Gazette. Rule 2. Definitions.- In these rules, unless the context otherwise requires,- (a) "capital goods" means:- (A) the following goods, namely:-
(15 of 48) [EXCIA-49/2016] (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank, used- (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; (B) motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act; (b) "Customs Tariff Act" means the Customs Tariff Act, 1975 (51 of 1975); (c) "Excise Act" means the Central Excise Act, 1944 (1 of 1944); (d) "exempted goods" means excisable goods which are exempt from the whole of the duty of excise leviable thereon, and includes goods which are chargeable to "Nil" rate of duty; (e) "exempted services" means taxable services which are exempt from the whole of the servi ce tax leviable thereon, and includes services on which no service tax is leviable under section 66 of the Finance Act; (f) "Excise Tariff Act" means the Central Excise Tariff Act, 1985 (5 of 1986); (g) "Finance Act" means the Finance Act, 1994 (32 of 1994); (h) "final products" means excisable goods manufactured or produced from input, or using input service; (ij) "first stage dealer" means a dealer, who purchases the goods directly from,- (i) the manufacturer under the cover of an invoice issued in terms of the (16 of 48) [EXCIA-49/2016] provisions of Central Excise Rules, 2002 or from the depot of the said manufacturer, or from premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer, under cover of an invoice; or (ii) an importer or from the depot of an importer or from the premises of the consignment agent of the importer, under cover of an invoice; (k) "input" means (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service; Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer; (l) "input service" means any service,- (i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal,and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of (17 of 48) [EXCIA-49/2016] output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal; (m) "input service distributor" means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be; (n) "job work" means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression "job worker" shall be construed accordingly; (na) “manufacturer” or “producer” in relation to articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, includes a person who is liable to pay duty of excise leviable on such goods under sub-rule (1) of rule 12AA of the Central Excise Rules, 2002; (o) "notification" means the notification published in the Official Gazette; (p) "output service" means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions ‘provider’ and ‘provided’ shall be construed accordingly; Explanation.- For the removal of doubts it is hereby clarified that if a person liable for paying service tax does not provide any taxable service or does not manufacture final products, the service for which he is liable to pay service tax shall be deemed to be the output service.
(18 of 48) [EXCIA-49/2016] (q) "person liable for paying service tax" has the meaning as assigned to it in clause (d) of subrule (1) of rule 2 of the Service Tax Rules, 1994; (r) "provider of taxable service" include a person liable for paying service tax; (s) "second stage dealer" means a dealer who purchases the goods from a first stage dealer; (t) words and expressions used in these rules and not defined but defined in the Excise Act or the Finance Act shall have the meanings respectively assigned to them in those Acts. Rule 5. Refund of CENVAT credit.- Where any input or input service is used in the final products which is cleared for export under bond or letter of undertaking, as the case may be, or used in the intermediate products cleared for export, or used in providing output service which is exported, the CENVAT credit in respect of the input or input service so used shall be allowed to be utilized by the manufacturer or provider of output service towards payment of, (i) duty of excise on any final products cleared for home consumption or for export on payment of duty; or (ii) service tax on output service, and where for any reason such adjustment is not possible, the manufacturer shall be allowed refund of such amount subject to such safeguards, conditions and limitations, as may be specified, by the Central Government, by notification: Provided that no refund of credit shall be allowed if the manufacturer or provider of output service avails of drawback allowed under the Customs and Central Excise Duties Drawback Rules, 1995, or claims a rebate of duty under the Central Excise Rules, 2002, in respect of such duty: Provided further that no credit of the additional duty leviable under sub-section (5) of section 3 of the Customs Tariff Act, as amended by clause 72 of the Finance Bill, 2005, the clause which has, by virtue of the declaration made in the said Finance Bill, under the Provisional Collection of Taxes Act, 1931, the force of law, shall be utilised for payment of service tax on any output service.
(19 of 48) [EXCIA-49/2016] Explanation: For the purposes of this rule, the words ‘output service which are exported’ means any output service in respect of which payment is received in Indian in convertible foreign exchange and the same is not repatriated from, or sent outside, India. Rules 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, except inputs intended to be used as fuel, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely:- (a) if the exempted goods are (20 of 48) [EXCIA-49/2016] (i) goods falling within heading No. 22.04 of the First Schedule to the Excise Tariff Act (hereinafter in this rule referred to as the said First Schedule); (ii) Low Sulphur Heavy Stock (LSHS) falling within Chapter 27 of the said First Schedule used in the generation of electricity; (iii) Naphtha (RN) falling within Chapter 27 of the said First Schedule used in the manufacture of fertilizer; (iv) Naptha (RN) and furnace oil falling within Chapter 27 of the said First Schedule used for generation of electricity; (v) newsprint, in rolls or sheets, falling within heading No.48.01 of the said First Schedule; (vi) final products falling within Chapters 50 to 63 of the said First Schedule, (vii) goods supplied to defence personnel or for defence projects or to the Ministry of Defence for official purposes, under any of the following notifications of the Government of India in the Ministry of Finance (Department of Revenue), namely:- (1) No. 70/92-Central Excise, dated the 17th June, 1992, G.S.R. 595 (E), dated the 17th June, 1992; (2) No. 62/95-Central Excise, dated the 16th March, 1995, G.S.R. 254 (E), dated the 16th March, 1995; (3) No. 63/95-Central Excise, dated the 16th March, 1995, G.S.R. 255 (E), dated the 16th March, 1995; (4) No. 64/95-Central Excise, dated the 16th March, 1995, G.S.R. 256 (E), dated the 16th March, 1995, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in relation to, the manufacture of such final products at the time of their clearance from the factory; or (b) if the exempted goods are other than those described in condition (a), the manufacturer shall pay an amount equal to ten per cent. of the total price, excluding sales tax and other taxes, if any, paid on such (21 of 48) [EXCIA-49/2016] goods, of the exempted final product charged by the manufacturer for the sale of such goods at the time of their clearance from the factory; (c) the provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cent. of the amount of service tax payable on taxable output service. Explanation I.- The amount mentioned in conditions (a) and (b) shall be paid by the manufacturer or provider of output service by debiting the CENVAT credit or otherwise. Explanation II.- If the manufacturer or provider of output service fails to pay the said amount, it shall be recovered along with interest in the same manner, as provided in rule 14, for recovery of CENVAT credit wrongly taken. (4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. (5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either (i) cleared to a unit in a special economic zone; or (ii) cleared to a hundred per cent. export- oriented undertaking; or (iii)cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or (22 of 48) [EXCIA-49/2016] (iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95-Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under section 3 of the said Customs Tariff Act when imported into India and supplied against International Competitive Bidding in terms of notification No. 6/2002-Central Excise dated the 1st March, 2002. Rule 7. Manner of distribution of credit by input service distributor.- The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition, namely:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon; or (b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded.- Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacturer or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
(23 of 48) [EXCIA-49/2016] Rule 15. Confiscation and penalty.- (1) If any person, takes CENVAT credit in respect of input or capital goods, wrongly or without taking reasonable steps to ensure that appropriate duty on the said input or capital goods has been paid as indicated in the document accompanying the input or capital goods specified in rule 9, or contravenes any of the provisions of these rules in respect of any input or capital goods, then, all such goods shall be liable to confiscation and such person, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention has been committed, or ten thousand rupees, whichever is greater. . (2) In a case, where the CENVAT credit in respect of input or capital goods has been taken or utilized wrongly on account of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Excise Act or the rules made thereunder with intention to evade payment of duty, then, the manufacturer shall also be liable to pay penalty in terms of the provisions of section 11AC of the Excise Act. (3) If any person, takes CENVAT credit in respect of input services, wrongly or without taking reasonable steps to ensure that appropriate service tax on the said input services has been paid as indicated in the document accompanying the input services specified in rule 9, or contravenes any of the provisions of these rules in respect of any input service, then, such person, shall be liable to a penalty which may extend to an amount not exceeding ten thousand rupees. (4) In a case, where the CENVAT credit in respect of input services has been taken or utilized wrongly by reason of fraud, collusion, willful mis-statement, suppression of facts, or contravention of any of the provisions of the Finance Act or of the rules made thereunder with intention to evade payment of service tax, then, the provider of output service shall also be liable to pay penalty in terms of the provisions of section 78 of the Finance Act. (5) Any order under sub-rule (1), sub-rule (2), sub-rule (3) or sub-rule (4) shall be issued by the Central Excise Officer following the principles of natural justice.
(24 of 48) [EXCIA-49/2016]
Supplementary provision.- (1) Any notification, circular, instruction, standing order, trade notice or other order issued under the CENVAT Credit Rules, 2002 or the Service Tax Credit Rules, 2002, by the Central Government, the Central Board of Excise and Customs, the Chief Commissioner of Central Excise or the Commissioner of Central Excise, and in force at the commencement of these rules, shall, to the extent it is relevant and consistent with these rules, be deemed to be valid and issued under the corresponding provisions of these rules. (2) References in any rule, notification, circular, instruction, standing order, trade notice or other order to the CENVAT Credit Rules, 2002 and any provision thereof or, as the case may be , the Service Tax Credit Rules, 2002 and any provision thereof shall, on the commencement of these rules, be construed as references to the CENVAT Credit Rules, 2004 and any corresponding provision thereof.
2 He relied on the provisions of Cenvat Credit Rules, 2004 for the assessment year 2010-11 which reads as under:- Rule 5A. Refund of CENVAT credit to units in specified areas.- Notwithstanding anything contrary contained in these rules, where a manufacturer has cleared final products in terms of notification of the Government of India in the Ministry of Finance
(Department
of Revenue) No.20/2007 - Central Excise, dated the 25th April, 2007 and is unable to utilize the CENVAT credit of duty taken on inputs required for manufacture of final products specified in the said notification, other than final products which are exempt or subject to nil rate of duty, for payment of duties of excise on said final products, then the Central Government may allow the refund of such credit subject to such procedure, conditions and limitations, as may be specified
by notification. Explanation: For the purposes of this rule, "duty" means the duties specified in sub-rule (1) of rule 3 of these rules.
(25 of 48) [EXCIA-49/2016] Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned
in sub-rule
(2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. (2) Where a manufacturer or provider of output service avails of CENVAT credit in respect of any inputs or input services, and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services, then, the manufacturer or provider of output service shall maintain separate accounts for receipt, consumption and inventory of input and input service meant for use in the manufacture of dutiable final products or in providing output service and the quantity of input meant for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable. (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of goods or the provider of output service, opting not to maintain separate accounts, shall follow either of the following options, as applicable to him, namely:- (i) the manufacturer of goods shall pay an amount equal to five per cent. of value of the exempted goods and the provider of output service shall pay an amount equal to six percent. of value of the exempted services; or (ii) the manufacturer of goods or the provider of output service shall pay an amount equivalent to the CENVAT credit attributable to inputs and input services used in, or in (26 of 48) [EXCIA-49/2016] relation to, the manufacture of exempted goods or for provision of exempted services subject to the conditions and procedure specifiedin sub-rule (3A). Explanation I.- If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. Explanation II.-For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars, namely:- (i) name, address and registration No. of the manufacturer of goods or provider of output service; (ii) date from which the option under this clause is exercised or proposed to be exercised; (iii) description of dutiable goods or taxable services; (iv) description of exempted goods or exempted services; (v) CENVAT credit of inputs and input services lying in balance as on the date of exercising the option under this condition; (b) the manufacturer of goods or the provider of output service shall, determine and pay, provisionally, for every month,- (i) the amount equivalent to CENVAT credit attributable to inputs used in or in relation to manufacture
of exempted goods, denoted as A; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services
(27 of 48) [EXCIA-49/2016] (provisional)= (B/C) multiplied by D, where B denotes the total value of exempted services provided during the preceding financial year, C denotes the total value of dutiable goods manufactured
and removed plus the total value of taxable services provided plus the total value of exempted
services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs
during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted
goods
or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total
value
of exempted services provided plus the total value of exempted goods manufactured and removed
during the preceding financial year, F denotes total value of taxable and exempted services provided,
and total value of dutiable and exempted goods manufactured and removed, during the preceding
financial year, and G denotes total CENVAT credit taken on input services during the month; (c) the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely:- (i) the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services
=
(J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial
year, K denotes the total value of dutiable goods manufactured and removed plus the total value
of taxable services provided plus the total value of exempted services provided, during the financial
year
and L denotes total CENVAT credit taken on inputs during the financial year minus H;
(28 of 48) [EXCIA-49/2016] (iii) the amount attributable to input services used in or in relation to manufacture of exempted
goods
or provision of exempted services = (M/N) multiplied by P, where M denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during
the financial year, N denotes total value of taxable and exempted services provided, and total
value
of dutiable and exempted goods manufactured and removed, during the financial year, and P denotes
total CENVAT credit taken on input services during the financial year; (d) the manufacturer of goods or the provider of output service, shall pay an amount equal to the difference between the aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before the 30th June of the succeeding financial year, where the amount determined as per condition (c) is more than the amount paid; (e) the manufacturer of goods or the provider of output service, shall, in addition to the amount short-paid, be liable to pay interest at the rate of twenty-four per cent. per annum from the due date, i.e., 30th June till the date of payment, where the amount short-paid is not paid within the said due date; (f) where the amount determined as per condition (c) is less than the amount determined and paid as per condition (b), the said manufacturer of goods or the provider of output service may adjust the excess amount on his own, by taking credit of such amount; (g) the manufacturer of goods or the provider of output service shall intimate to the juri ictional Superintendent of Central Excise, within a period of fifteen days from the date of payment or adjustment, as per condition (d) and (f) respectively, the following particulars, namely:- (i) details of CENVAT credit attributable to exempted goods and exempted services, month wise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial
year, determined as per condition (c), (iii) amount short paid determined as per condition (d), along with the date of payment
(29 of 48) [EXCIA-49/2016] of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); (h) where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no taxable service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service shall, in addition to the said amount, be liable to pay interest at the rate of twenty four per cent. per annum from the due date till the date of payment. Explanation I.- "Value" for the purpose of sub-rules (3) and (3A) shall have the same meaning assigned to it under section 67 of the Finance Act, 1994 read with rules made thereunder or, as the case may be, the value determined under section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder. Explanation II.-The amount mentioned in sub-rules (3) and (3A), unless specified otherwise, shall be paid by the manufacturer of goods or the provider of output service by debiting the CENVAT credit or otherwise on or before the 5th day of the following month except for the month of March, when such payment shall be made on or before the 31st day of the month
of March. Explanation III.- If the manufacturer of goods or the provider of output service fails to pay the amount payable under sub-rule (3) or as the case may be sub-rule (3A), it shall be recovered, in the manner as provided in rule 14, for recovery of CENVAT credit wrongly taken. (4) No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of (30 of 48) [EXCIA-49/2016] clearances
made
in a financial
year. (5) Notwithstanding anything contained in sub-rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted services. (6) The provisions of sub-rules (1), (2), (3) and (4) shall not be applicable in case the excisable goods removed without payment of duty are either- (i) cleared to a unit in a special economic zone; or to a developer of a special economic zone for their authorized operations ; or (ii) cleared to a hundred per cent. export-oriented undertaking; or (iii) cleared to a unit in an Electronic Hardware Technology Park or Software Technology Park; or (iv) supplied to the United Nations or an international organization for their official use or supplied to projects funded by them, on which exemption of duty is available under notification of the Government of India in the Ministry of Finance (Department of Revenue) No.108/95- Central Excise, dated the 28th August, 1995, number G. S R. 602 (E), dated the 28th August, 1995; or (v) cleared for export under bond in terms of the provisions of the Central Excise Rules, 2002; or (vi) gold or silver falling within Chapter 71 of the said First Schedule, arising in the course of manufacture of copper or zinc by smelting; or. (vii) all goods which are exempt from the duties of customs leviable under the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and the additional duty leviable under sub-section (1) of section 3 of the said Customs Tariff Act when imported into India and are supplied,- (a) against International Competitive Bidding; or (b) to a power project from which power supply has been tied up through tariff based competitive bidding; or (c) to a power project awarded to a developer through tariff based competitive bidding, In terms of notification No. 6/2006-Central Excise, dated the 1st March, 2006. (31 of 48) [EXCIA-49/2016] Rule 7. Manner of distribution of credit by input service distributor. - The input service distributor may distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or units providing output service, subject to the following condition,
namely:- (a) the credit distributed against a document referred to in rule 9 does not exceed the amount of service
tax
paid
thereon;
or (b) credit of service tax attributable to service use in a unit exclusively engaged in manufacture of exempted goods or providing of exempted services shall not be distributed. Rule 7A. Distribution of credit on inputs by the office or any other premises of output service provider.- (1) A provider of output service shall be allowed to take credit on inputs and capital goods received, on the basis of an invoice or a bill or a challan issued by an office or premises of the said provider of output service, which receives invoices, issued in terms of the provisions of the Central Excise Rules, 2002, towards the purchase of inputs and capital goods. (2) The provisions of these rules or any other rules made under the Central Excise Act, 1944, as made applicable to a first stage dealer or a second stage dealer, shall mutatis mutandis apply to such office or premises of the provider of output service. Rule 8. Storage of input outside the factory of the manufacturer.- The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having juri iction over the factory of a manufacturer of the final products may, in exceptional circumstances having regard to the nature of the goods and shortage of storage space at the premises of such manufacturer, by an order, permit such manufacturer to store the input in respect of which CENVAT credit has been taken, outside such factory, subject to such limitations and conditions
as he
may specify: Provided that where such input is not used in the manner specified in these rules for any reason whatsoever, the manufacturer of the final products shall pay an amount equal to the credit availed in respect of such input. Rule 9. Documents and accounts.- (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :- (a) an invoice issued by-
(32 of 48) [EXCIA-49/2016] (i) a manufacturer for clearance of - (I) inputs or capital goods from his factory or depot or from the premises of the consignment
agent
of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer; (II) inputs or capital goods as such; (ii) an importer; (iii) an importer from his depot or from the premises of the consignment agent of the said importer
if the said depot or the premises, as the case may be, is registered in terms of the provisions of Central Excise Rules, 2002; (iv) a first stage dealer or a second stage dealer, as the case may be, in terms of the provisions of Central Excise Rules, 2002; or (b) a supplementary invoice, issued by a manufacturer or importer of inputs or capital goods in terms of the provisions of Central Excise Rules, 2002 from his factory or depot or from the premises of the consignment agent of the said manufacturer or importer or from any other premises from where the goods are sold by, or on behalf of, the said manufacturer or importer, in case additional amount of excise duties or additional duty leviable under section 3 of the Customs Tariff Act, has been paid, except where the additional amount of duty became recoverable from the manufacturer or importer of inputs or capital goods on account of any non-levy or short- levy by reason of fraud, collusion or any wilful misstatement or suppression of facts or contravention of any provisions of the Excise Act, or of the Customs Act, 1962 (52 of 1962) or the rules made there under with intent to evade payment of duty. Explanation.- For removal of doubts, it is clarified that supplementary invoice shall also include challan or any other similar document evidencing payment of additional amount of additional duty leviable under section 3 of the Customs Tariff Act; or (c) a bill of entry; or (d) a certificate issued by an appraiser of customs in respect of goods imported through a Foreign Post Office; or (e) a challan evidencing payment of service tax by the person liable to pay service tax under sub-clauses (iii), (iv), (v) and (vii) of clause (d) of sub-rule (1) of rule (2) of the Service Tax Rules, 1994; or (f) an invoice, a bill or challan issued by a provider of input service on or after the 10th day of, September, 2004; or (g) an invoice, bill or challan issued by an input service
(33 of 48) [EXCIA-49/2016] distributor under rule 4A of the Service Tax Rules, 1994. Provided that the credit of additional duty of customs levied under sub-section (5) of section 3 of the Customs Tariff Act, 1975 (51 of 1975) shall not be allowed if the invoice or the supplementary invoice, as the case may be, bears an indication to the effect that no credit of the said additional duty shall be admissible; (2) No CENVAT credit under sub-rule(1) shall be taken unless all the particulars as prescribed under the Central Excise Rules, 2002 or the Service Tax Rules, 1994, as the case may be, are contained in the said document: Provided that if the said document does not contain all the particulars but contains the details of duty or service tax payable, description of the goods or taxable service, assessable value, Central Excise or Service tax Registration number of the person issuing the invoice, as the case may be, name and address of the factory or warehouse or premises of first or second stage dealers or provider of taxable service, and the Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, is satisfied that the goods or services covered by the said document have been received and accounted for in the books of the account of the receiver, he may allow the CENVAT credit; (3) Omitted (4) The CENVAT credit in respect of input or capital goods purchased from a first stage dealer or second stage dealer shall be allowed only if such first stage dealer or second stage dealer, as the case may be, has maintained records indicating the fact that the input or capital goods was supplied from the stock on which duty was paid by the producer of such input or capital goods and only an amount of such duty on pro rata basis has been indicated in the invoice
issued
by him. (5) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon (34 of 48) [EXCIA-49/2016] the manufacturer or provider of output service taking such credit. (6) The manufacturer of final products or the provider of output service shall maintain proper records for the receipt and consumption of the input services in which the relevant information regarding the value, tax paid, CENVAT credit taken and utilized, the person from whom the input service has been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit. (7) The manufacturer of final products shall submit within ten days from the close of each month to the Superintendent of Central Excise, a monthly return in the form specified, by notification, by the Board: Provided that where a manufacturer is availing exemption under a notification based on the value or quantity of clearances in a financial year, he shall file a quarterly return in the form specified, by notification, by the Board within twenty days after the close of the quarter to which the return
relates. (8) A first stage dealer or a second stage dealer, as the case may be, shall submit within fifteen days from the close of each quarter of a year to the Superintendent of Central Excise, a return in the form specified, by notification, by the Board. (9) The provider of output service availing CENVAT credit, shall submit a half yearly return in form specified, by notification, by the Board to the Superintendent of Central Excise, by the end of the month following the particular quarter
or half
year. (10) The input service distributor, shall furnish a half yearly return in such form as may be specified, by notification, by the Board, giving the details of credit received and distributed during the said half year to the juri ictional Superintendent of Central Excise, not later than the last day of the month following the half year period. (11) The provider of output service, availing CENVAT credit referred to in sub-rule (9) or the input service distributor referred to in sub-rule (10), as the case may be, may submit a revised return to correct a mistake or omission within a period of sixty days from the date of submission of the return under sub-rule (9) or sub-rule (10), as the case may be.
(35 of 48) [EXCIA-49/2016]
3 He also taken us to the provisions of Finance Act, 1994 which reads as under:-
Amendment of section 127B.- In the Customs Act, 1962 (hereinafter referred to as the Customs Act), in section 127B, in sub- section (1), for the words “but excluding the goods not included in the entry made under this Act”, the words “or otherwise” shall be substituted.
Amendment of section 127C.- In section 127C of the Customs Act, in sub-section (6), the following proviso shall be inserted, namely: — “Provided that the period specified under this sub-section may, for reasons to be recorded in writing, be extended by the Settlement Commission for a further period not exceeding three months.”.
Amendment of section 127L- In section 127L of the Customs Act, (a) in sub-section (1),— (i) the words, figures and letters “before the 1st day of June, 2007” shall be omitted; (ii) in clause (i), after the words, brackets, figures and letter “sub-section (7) of section 127C”, the words, figures, brackets and letter “as it stood immediately before the commencement of section 102 of the Finance Act, 2007 or sub-section (5) of section 127C” shall be inserted; (iii) in clause (ii), after the word, brackets and figure “sub-section (7)”, the words, figures, brackets and letter “as it stood immediately before the commencement of section 102 of the Finance Act, 2007 or sub-section (5) of section 127C” shall be inserted; (b) sub-section (2) shall be omitted.
(1) Amendment of rule 6 of CENVAT Credit Rules, 2002. - In the CENVAT Credit Rules, 2002, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, and published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 144(E), dated the 1st March, 2002, rule 6 shall (36 of 48) [EXCIA-49/2016] stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Seventh Schedule, on and from and up to the corresponding date specified in column (4) of that Schedule, against the rule specified in column (2) of that Schedule. (2) Where a person opts to pay the amount in accordance with the provisions as amended by sub-section (1), he shall pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of exempted goods within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. (3) The Commissioner of Central Excise shall, on receipt of an application under subsection (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the application and in case the amount so paid is found to be less than the amount payable, he shall call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard. (4) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 1st day of March, 2002 and ending with the 9th day of September, 2004, relating to the provisions as amended by sub- section (1), shall be deemed to be, and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times. (5) Notwithstanding the supersession of the CENVAT Credit Rules, 2002, for the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make
(37 of 48) [EXCIA-49/2016] rules under section 37 of the Central Excise Act, retrospectively, at all material times. Explanation.—For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this section not come into force.
Amendment of rule 6 of CENVAT Credit Rules, 2004. (1) In the CENVAT Credit Rules, 2004, made by the Central Government in exercise of the powers conferred by section 37 of the Central Excise Act, as published in the Official Gazette vide notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 600(E), dated the 10th September, 2004, rule 6 shall stand amended and shall be deemed to have been amended retrospectively, in the manner specified in column (3) of the Eighth Schedule, on and from and up to the corresponding date specified in column (4) of that Schedule, against the rule specified in column (2) of that Schedule. (2) Where a person opts to pay the amount in accordance with the provisions as amended by sub-section (1), he shall pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or a Cost Accountant, certifying the amount of input credit attributable to the inputs used in or in relation to the manufacture of exempted goods, within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President. (3) The Commissioner of Central Excise shall, on receipt of an application under subsection (2), verify the correctness of the amount paid within a period of two months from the date of receipt of the application and in case the amount so paid is found to be less than the amount payable, he shall call upon the applicant to pay the differential amount along with interest, which shall be paid within a period of ten days from the date of receipt of the communication from the Commissioner in this regard.
(38 of 48) [EXCIA-49/2016] (4) Notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority, any action taken or anything done or purported to have been taken or done, at any time during the period commencing on and from the 10th day of September, 2004 and ending with the 31st day of March, 2008, relating to the provisions as amended by sub- section (1), shall be deemed to be and deemed always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times. (5) For the purposes of sub-section (1), the Central Government shall have and shall be deemed to have the power to make rules with retrospective effect as if the Central Government had the power to make rules under section 37 of the Central Excise Act, retrospectively, at all material times. Explanation.—For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable had this section not come into force.
Amendment of notification issued under rule 5 of CENVAT Credit Rules, 2004. - In the notification of the Government of India in the Ministry of Finance (Department of Revenue) number G.S.R. 156(E), dated the 14th day of March, 2006, issued under rule 5 of the CENVAT Credit Rules, 2004, with effect from the 14th day of March, 2006, (A) in the opening portion,— (i) in clause (a), for the words “used in”, the words “used in or in relation to” shall be substituted and shall be deemed to have been substituted; (ii) in clause (b), for the words “used in”, the words “used for” shall be substituted and shall be deemed to have been substituted; (B) in the Appendix, in condition 5, the portion beginning with the letters and words “i.e. Maximum refund” and ending with the letters and figures “i.e. Rs. 50” shall be omitted and shall be deemed to have been omitted.
(39 of 48) [EXCIA-49/2016]
Amendment of First Schedule to Act 5 of 1986. - The First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as the Central Excise Tariff Act) shall be amended in the manner specified in the Ninth Schedule
Amendment of Act 32 of 1994. - In the Finance Act, 1994, (A) in section 65, save as otherwise provided, with effect from such date as the Central Government may, by notification in the Official Gazette, appoint,— (1) in clause (19), in sub-clause (ii), the Explanation shall be omitted; (2) after clause (19a), the following clause shall be inserted, namely:— ‘(19b) “business entity” includes an association of persons, body of individuals, company or firm but does not include an individual;’; (3) in clause (25b), for the words “commercial or industrial construction service”, the words “commercial or industrial construction” shall be substituted; (4) for clause (77c), the following clause shall be substituted, namely:— ‘(77c) “passenger” means any person boarding an aircraft in India for performing domestic journey or international journey;’; (5) for clause (82), the following clause shall be substituted, namely:— ‘(82) “port service” means any service rendered within a port or other port, in any manner;’; (6) in clause (105),— (a) for sub-clause (zn), the following sub-clause shall be substituted, namely:— “(zn) to any person, by any other person, in relation to port services in a port, in any manner: Provided that the provisions of section 65A shall not apply to any service when the same is rendered wholly within the port;’’;
4 He also taken us to the Rule 6 wherein after sub-rule 6 following sub-rule has been inserted and in tabular form the same reads as under:-
(40 of 48) [EXCIA-49/2016] SI. No. Provisions of CENVAT Credit Rules, 2004 to be amended Amendment Period
of effect
of amendment (1) (2) (3) (4) Rule 6 of the CENVAT Credit Rules, 2004 as published vide notifiation number G.S.R. 600(E), dated the 10th September, 2004 [23/2004- CENTRAL EXCISE (N.T.) dated the 10th September, 2004] In the CENVAT Credit Rules, 2004, in rule 6, after sub-rule (6), the following sub-rule shall be inserted, namely:- "(7) Where a dispute relating to adjustment of credit on inputs or input services used in or in relation to exempted beginning on the 10th day of September, 2004 and ending with the 31st day of March, 2008 (both days inclusive) is pending on the date on which the Finance Bill, 2010 receives the assent of the President, then,
notwithstanding
anything contained in sub-rules (1) and (2), and clauses (a) and (b) of sub-rule (3), a manufacturer availing CENVAT credit in respect of any inputs or input services and manufacturer availing CENVAT credit in respect of any inputs or input services and manufacturing final products which are chargeable to duty and also other final products which are exempted goods, may pay an amount equivalent to CENVAT credit attributable to the inputs or input services used in, or in relation to the manufacture of, exempted goods before or after the clearance of such goods: Provided that the manufacturer shall pay interest at the rate of twenty-four per cent. Per annum from the due date till the date of payment of the said amount. Explanation.- For the purpose of this sub-rule, "due date" means the 5the day of the month following the month in which goods have been cleared from the factory." 10th day of September, 2004 to the 31st day of March, 2008 (both days inclusive).
(41 of 48) [EXCIA-49/2016]
5 Counsel for the respondent has relied upon the following decisions:-
6 In Commissioner of Central Excise, Mumbai-I vs. Bombay Dyeing and Mfg. Co. Ltd. 2007 (215) ELT 3 SC, it has been held as under :-
There is no merit in this civil appeal. Under the notification, mode of payment has not been prescribed. Further, exemption is given to the final product, namely, grey fabric under the Central Excise Act, 1944, levy is on manufacture but payment is at the time of clearance. Under the Act, payment of duty on yarn had to be at the spindle stage. However, when we come to the Exemption Notification No. 14/2002-CE, the requirement was that exemption on grey fabrics was admissible subject to the assessee paying duty on yarn before claiming exemption and subject to the assessee not claiming CENVAT credit before claiming exemption. The question of exemption from payment of duty on grey fabrics arose on satisfaction of the said two conditions. In this case, payment of duty on yarn on deferred basis took place before clearance of grey fabrics on which exemption was claimed. Therefore, payment was made before the stage of exemption. Similarly, on payment of duty on the input (yarn) the assessee got the credit which was never utilized. That before utilization, the entry has been reversed which amounts to not taking credit. Hence, in this case, both the conditions are satisfied. Hence item No. 1 of the table to notification No. 14/2002-CE would apply and accordingly the grey fabrics would attract nil rate of duty.
In conclusion on the question of reversal of credit we quote hereinbelow the following para from the judgment of this Court in (42 of 48) [EXCIA-49/2016] Collector of Central Excise v. Dai Ichi Karkaria Ltd. reported in 1999ECR4(SC) . It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes the requisite declaration and obtains an acknowledgement thereof. It is entitled to use the credit at any time thereafter when making payment of excise duty on the excisable product. There is no provision in the Rules which provides for a reversal of the credit by the excise authorities except where it has been illegally or irregularly taken, in which event it stands cancelled or, if utilised, has to be paid for. We are here really concerned with credit that has been validly taken, and its benefit is available to the manufacturer without any limitation in time or otherwise unless the manufacturer itself chooses not to use the raw material in its excisable product. The credit is, therefore, indefeasible. It should also be noted that there is no co-relation of the raw material and the final product; that is to say, it is not 234 (SC), it has been held as under :-
We note that five-Member Bench of the Tribunal in the case of ‘Franco Italian Co. Pvt. Ltd. vs. Commisioner [2000 (120) ELT 792 (T. LB) had taken the view that even if the MODVAT credit was utilised but, thereafter, refunded, it would amount to not utilizing the said MODVAT credit. Same view has been taken by the High Court of Allahabad in ‘Hello
(43 of 48) [EXCIA-49/2016] [2004 (174) ELT 422 (All.)].
On a specific query put by the Court, we 2004 (174) ELT 422 (ALLHC), it has been held as under :-
The Tribunal while passing the impugned order dated 1-10-2003 (Tri. - Del.)] has not referred to the larger Bench decision of the Tribunal and other binding decisions. In Chandrapur Magnet Wire Limited v. Collector Central Excise, (SUPRA) the Supreme Court has held :- "If debit entry is permissible to be made, the credit entry for duties paid on the inputs utilised in manufacture of final exempted product will stand deleted in the account of the assessee. In such a situation it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of final exempted product under Rule 57-A. In other words the claim of exemption of duty on the disputed goods cannot be denied on the plea that the assessee has taken credit of duty paid on the inputs used in manufacture of these goods."
The Tribunal while passing the impugned order dated 1-10-2003 instead of following the principles of law and the ratio of the decision of the Supreme Court in Chandrapur Magnet Wires Ltd. (supra) and also the decision of the larger five Members Bench of the Tribunal in the case of Franco Italian
(44 of 48) [EXCIA-49/2016] Company (P) Limited (supra) and other larger bench decision in the case of ICON Pharma and Surgical (P) Ltd. - 2000 (40) RLT 918 has held that reversal on inputs credit should have been done before removal of the bottles. In our opinion the Tribunal has completely misunderstood the decision in the case of Chandrapur Magnet Wires Ltd. (supra) in which the Supreme Court has quoted the Circular issued by the Ministry of Finance, being Circular No. 22/8/86, dated 10-4-1986. In Para 5 of the said Circular it (257) ELT 397 wherein it has been held as under :-
Having regard to the rival contentions of learned Counsel for the appellant, we are of the view that the assessee is entitled to the exemption. Again, it is not a matter of dispute that the assessee has reversed the credit in respect of inputs used in the manufacture of exempted as well as non- exempted products. However, the argument of learned Counsel for the revenue that since the reversal of credit was after the verification and detection by the Department, therefore, the assessee is not entitled to the exemption, is not only devoid of merit, but misplaced as well, because the mere fact of reversal of credit is sufficient compliance to claim the indicated benefit, in respect of inputs used in the exempted goods as admittedly, the assessee is manufacturing
(45 of 48) [EXCIA-49/2016] (267) ELT 153 wherein it has been held as under :
The dispute in the present case relates to the entitlement of the Petitioners to reverse proportionate amount of credit in respect of the final product carrying nil rate of duty. At the relevant time, in the light of the provisions of Rule 57CC of the Rules, the entitlement of the Petitioner to reverse the credit to the extent of common inputs used in the manufacture of goods which carried nil rate of duty was in doubt. However, subsequently, by the introduction of Rule 57CCC of the Central Excise Rules, the situation has been taken care of inasmuch as the said rule which has been given retrospective effect from 1996 provides for reversal of the actual credit by the manufacturer availing credit of specified duty in respect of inputs used for manufacture of final products which are chargeable to duty as also other final product which are not chargeable to duty or chargeable to Nil rate of duty, by payment of amount equivalent to the credit attributable to input used in or in relation to the manufacture of such final products which are not chargeable to duty or chargeable to nil rate of duty before or after the clearance of such goods. Sub-section (2) of Section 69 of the Finance Act, 2010 provides that where a person opts to pay the amount in accordance with the provisions of Central Excise Rules, 1944 as amended by Sub-section (1), he is required to pay the amount along with interest specified thereunder and make an application to the Commissioner of Central Excise along with documents as laid down therein within a period of six months from the date on which the Finance Bill, 2010 receives the assent of the President.
(46 of 48) [EXCIA-49/2016] 6.1 :-
We agree with the contention of the learned counsel for the respondent-assessee. As seen from the adjudication order referring to the reply of the assessee, a specific stand was taken by the assessee that for the months of January and February, 2008, it had not made any credit entry on the furnace oil used in the manufacture of exempted goods and during the month of March, 2008, whatever credit was taken, the same was reversed by the assessee. In the course of appeal before the Tribunal, it is no doubt true that the Tribunal accepted the above said fact, particularly as regards January and February, 2008. Even though the learned counsel for the Revenue stated that such a finding is perverse, when read in the context of the reply filed by the assessee, on which there was no material from the Revenue side for rejection, we do not find any ground to uphold the contention of the Revenue as regards the non-utilisation of any Cenvat credit for the month of January and February, 2008. This leaves only one month, namely, March, 2008. 10. The contention of the assessee is that although the credit on furnace oil was originally taken, it, however, reversed it thereafter. In the background of the said claim, the Tribunal thought it fit to remand the matter back, directing the adjudicating authority to find out as to whether the formula provided for has been properly applied in this case. Ultimately if the assessee is to have the benefit of no liability, it has to follow the formula provided for under rule 6(3A) of the Cenvat Credit Rules.
Thus, the question that has to be (47 of 48) [EXCIA-49/2016] considered is as to whether the reversal of the credit for the month of March, 2008 was taken on the basis of the formula provided for and in accordance with section 73(2) of the Finance Act, 2010. In the decision of Shree Rama Multi Tech Ltd. v. Union of India reported in : [2013] 19 GSTR 31 (Guj); [2011] 267 ELT 153 (Guj), the Gujarat High Court considered a similar situation. There printing ink was used in the manufacture of dutiable plastic material and exempted labels and separate account under rule 57C of the Rules was not maintained. The Gujarat High Court observed as follows ( GSTR): Rule 57C of the Rules laid down that no credit of the specified duty paid on the inputs used in the manufacture of a final product shall be allowed if the final product is exempt from the whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Rule 57CC of the Rules as it stood at the relevant time made provision for 'Adjustment of credit if final products are exempted'. Under the said rule where a manufacturer was engaged in the manufacture of any final product which was chargeable to duty as well as any other final product which was exempt from the whole of the duty of excise leviable thereon or was chargeable to nil rate of duty and the manufacturer took credit of the specified duty on any input (other than inputs used as fuel) which was used or ordinarily used in or in relation to the manufacture of both the aforesaid categories of final products, whether directly or indirectly and whether contained in the said final products or not, the manufacturer shall, unless the provisions of sub-rule (2) are complied with, pay an amount equal to eight per cent. of the price (excluding sales tax and other taxes, if any, payable on such goods) of the second category of final products charged by the manufacturer for the sale of goods at the time of clearance from their factory by adjustment in the credit
(48 of 48) [EXCIA-49/2016] account maintained under sub-rule (3) of rule 57G or in the accounts maintained under rule 9 of sub-rule (1) of rule 173G or if such adjustment is not possible for any reason, by cash recovery from the manufacturer availing of the credit under rule 57A. Sub-rule (2) thereof provided that in respect of inputs (other than inputs used as fuel) which are used in or in relation to the manufacture of any goods, which are exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty, the manufacturer shall maintain separate inventory and accounts of the receipt and use the inputs for the aforesaid purpose and does not take credit of the specified duty on such inputs.
2 Taking into consideration the finding recorded by the tribunal relying on the decision of the Supreme Court, we are of the considered opinion that tribunal has not committed any error. Since the distinction which is sought to be made here was never pointed out before the tribunal, therefore, it is very difficult for us to hold that the tribunal has committed any serious error in allowing the appeal of the assessee.
In that view of the matter, the issue is answered in favour of the assessee and against the department.
The appeal stands dismissed. (VIJAY KUMAR VYAS)J. (K.S. JHAVERI)J. Brijesh 46.
Reproduced from the public record of the Rajasthan High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.