P. R. Chandrasekharan
1. The appeal and stay application are directed against the order-in-appeal No.PKS/323/BEL/2010 dated 24/09/2010 passed by Commissioner of Central Excise (Appeals), Mumbai.
2. The brief facts of the case are that the appellant M/s.R. R. Paints Pvt. Ltd., Mumbai, are the manufacturers of exempted as well as dutiable goods and availed Cenvat facility for payment of duty. During the course of audit of their records, it was noticed that the appellant did not maintain separate accounts as required under Rule 6 (2) of the Cenvat Credit Rules, 2004 in respect of common inputs service used in the manufacture of exempted products as well as dutiable products. Therefore, two show-cause notices both dated 28/09/2009, were issued for recovery of a sum of Rs.7,77,691/- equivalent to 10% of the total price of the exempted goods under Rule 6 (3) of the Cenvat Credit Rules, 2004 along with interest thereon under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11AB of Central Excise Act, 1944. The notice also proposed imposition of penalty under Section 15 (3) of the Cenvat Credit Rules, 2004. The notice was adjudicated and the impugned demand was confirmed and a penalty of Rs.20,000/- (Rs.10,000/- in each case) was imposed on the appellant. The appellant preferred an appeal before the lower appellate authority, who dismissed the appeal. Hence, the appellant is before me.
3. The Ld. Counsel for the appellant submit that it is a fact that they had not maintained separate records on the input service used in or in relation to the manufacture of exempted final products and dutiable final products during the impugned period from 2006-07 to 2008-09. The service tax credit which they have taken amounts to Rs.5,77,463/- and the service tax credit attributable to the dutiable product works out to Rs.5,45,065/- and the amount of credit attributable to exempted goods is only Rs.32,398/-. However, they have been asked to pay a sum of Rs.7,77,691/- being 10% of the price of the exempted goods cleared. He relies on the judgement of the Hon’ble High Court of Gujarat in the case of Shree Rama Multi Tech Ltd., Vs. UOI, reported in 2011 (267) ELT 153 (Guj) wherein in a similar situation the appellant therein was allowed to reverse proportionate credit, in view of the retrospective amendment to Cenvat Credit Rules, by Finance Act, 2010, which allows for reversal of proportionate credit in respect of exempted goods.
4. The Ld. AR appearing for the Revenue on the other submits that it is an admitted position that the appellant has availed Cenvat credit of the service tax paid on input services both in respect of dutiable as well as exempted goods and has not maintained separate records. Even after the retrospective amendment to the Cenvat credit Rules by Finance Act, 2010, the appellant neither made an application for reversal of proportionate credit nor reversed the proportionate credit which should have been done within six months from the date of enactment of Finance Act, 2010. In view of the above position, the appellant cannot now plead that they would reverse the proportionate Cenvat Credit.
5. I have carefully considered the rival submissions.
5.1 After hearing the arguments, I am of the view that the appeal itself can be disposed of at this stage. Accordingly, after allowing the stay application, I take up the appeal for consideration and disposal.
5.2 The undisputed facts in this case are that the appellant availed input service tax credit in respect of both dutiable as well as exempted final products and did not maintain separate accounts with respect to the such availment. Therefore, as per the provisions of Rule 6 (3) of the Cenvat Credit Rules, they were required to pay an amount equivalent to 10% of the value of the exempted goods cleared. Therefore, the confirmation of demand in this regard along with interest thereon cannot be faulted.
5.3 As regards the decision of the Hon’ble High Court of Gujarat in the case of Shree Rama Multi Tech Ltd. (supra), in that case the appellant therein had reversed the proportionate credit at the time of clearance of the goods, though the same was not provided for in Rule 57CC of the Cenvat Credit Rules at the relevant time. However, in view of the retrospective amendment by Section 69 of the Finance Act, 2010, they became entitled for such a facility. The appellant was pursuing an alternate remedy and did not make any application as provided for under Section 69. In that context, the Hon’ble High Court held that the appellant be permitted to file an application for regularization of the credit taken.
5.4 In the case before me the facts are completely different. The appellant herein, has not reversed proportionate credit attributable to exempted goods at the time of clearance of the exempted goods nor have they sought to regularize the same even after the enactment of Finance Act, 2010 within the time period stipulated therein. Section 69 of the Finance Act, 2010 specifically provided that the person who was availed the credit wrongly, should opt for the facility specified therein and make an application to the Commissioner of Central Excise along with documentary evidence and a certificate from a Chartered Accountant or Cost Accountant certifying the input credit attributable to the inputs used in or in relation to the manufacture of final products, which are exempted from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty within a period of six months from the date on which the Finance Bill 2010 receives the assent of the President. On such application, the Commissioner of Central Excise can 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. It may thus be seen that specific time limits have been prescribed in the Finance Act, 2010 for regularization of the Cenvat Credit wrongly taken. The appellant herein has not followed the procedure prescribed nor have they reversed the Cenvat credit. This Tribunal being a creation of the statute cannot over look or condone the time limits specified in the statute. Therefore, I am of the view that the benefit of decision of the hon’ble High Court of Gujarat in the Shree Rama Multi Tech Ltd., case cited supra cannot be granted to the appellant at this juncture. Inasmuch as the time limit expired in November 2010 itself and the appellant herein did not comply with the conditions stipulated therein, I hold that the order passed by the lower authorities cannot be faulted. The only relief that can be given to the appellant is with regard to the penalties imposed. Since there is no intention to evade any duty and taking into account the facts and circumstances of the case, I set aside the penalties imposed on the appellant. But for the above modification, the order of the lower appellate authority is upheld and the appeal is dismissed.