JINDAL PHOTO VERSUS C.C.E. & S.T.- VAPI

Excise APPEAL NO. 12658 OF 2013

(Arising out of SRP-138-VAPI-2013-14 dated 05.06.2013 passed by Commissioner of

Central Excise, Customs and Service Tax -Vapi)

 

JINDAL PHOTO

VERSUS

C.C.E. & S.T.- VAPI

 

APPEARANCE:

Shri. J. Surti, Advocate for the Appellant

Shri. R. K .Agarwal, Authorized Representative for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

Final Order No.___A/ 10098 /2023

DATE OF HEARING: 02.01.2023

DATE OF DECISION:23.01.2023

RAMESH NAIR

The facts in brief are that the appellant are engaged in the

manufacture of photographic paper, X-ray and Colour Roll films falling

under chapter 37. Their final product viz. Colour Positive unexposed

cinematographic film and roll was exempted from whole of excise duty

vide Notification No.33/2011-CE dated 25.06.2011. The appellant

reversed cenvat credit of Rs. 3,24,664/- vide entry No.491/492/495/496

dated 27.06.2011 from their RG 23A Part II account towards amount

equal to 5% of the value of the exempted clearances made on

27.06.2011, in terms of Rule 6(3)(i) of CCR. Subsequently, the appellant

reversed total amount of duty of Rs. 5,41,069/- vide entry No. 525/524

dated 01.07.2011 from their R.G.23A part II account against the raw

material in their stock and chose the second option of non-payment of

duty and to maintain separate account as provided in Rule 6 of CCR. The

appellant filed an application before the Deputy Commissioner seeking 

permission to retake credit of wrongly reversed said amount of Rs.

3,24664/-. In the department’s view, the amount of Rs.3,24,664/- was

correctly reversed under Rule 6 (3) of CCR as the option once exercised

to reverse amount in terms of Rule 6 cannot be changed during the

financial year. Therefore a Show Cause Notice was issued to the appellant

and after due process of law, the Adjudicating Authority, vide the order

dated 31.08.2012, has rejected the application and declined permission

for re-credit/refund.

1.2 Being aggrieved by the order-in-original dated 31.08.2012, the

appellant filed an appeal before Commissioner (Appeals), who concurring

with the views taken by the adjudicating authority upheld the order-in

original and rejected the appeal. Therefore, the present appeal.

Shri J. Surti, learned counsel appearing on behalf of the appellant

submits that though the appellant have reversed 5% immediately after

the notification No. 33/2011-CE dated 25.06.2011 exempted the product

namely ‘Colour Positive Unexposed Cinematographic Film’ they

mistakenly reverse 5% of the value of exempted clearances made on

27.06.2011 in terms of Rule 6(3)(i) of Cenvat Credit Rules, however, the

correct procedure was to reverse the cenvat credit attributed on the

inputs, WIP and finished goods lying in stock on date of exemption

notification in terms of Rule 11 of Cenvat Credit Rules-2004. The

appellant complying the said rule, reversed the cenvat credit of Rs.

5,41,069/- on the stock of exempted goods lying on 25.06.2011 which

also includes the clearances made on 27.06.2011, therefore, the reversal

made in terms of Rule 6 was rightly liable to be recredit/ refunded.

Therefore, the order-in-original as well as order-in-appeal are incorrect

and illegal which need to be set aside and appeal be allowed.

Shri

R.K. Agarwal, Learned Superintendent (Authorized

Representative) appearing on behalf of the Revenue reiterates the 

findings of the impugned order. He also relied on the Board Circular No.

868/6/2008-CX dated 09.05.2008 and submitted that once the assessee

availed the option under Rule 6(3), the same cannot be withdrawn during

the said financial year, therefore, the appellant first reversed the amount

of 5% in terms of Rule 6(3), the same cannot be allowed to be recridt/

refunded.

I have carefully considered the submissions made by both the sides

and perused the records.

I find that the appellant the fact is not under dispute that the

appellant’s products namely, ‘Colour Positive Unexposed Cinematographic

Film’ became exempted vide notification No. 33/2011-CE dated

25.06.2011. In case of goods became exempted for the purpose of

cenvat, the procedure prescribed under Rule 11(3) need to be followed

which is reproduced below:

Rule 11(3) : The CENVAT credit in respect of input 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 was supplied from the stock on

which duty was paid by the producer of such input and only an amount of

such duty on pro rata basis has been indicated in the invoice issued by

him :

Provided that provisions of this sub-rule shall apply mutatis mutandis to

an importer who issues an invoice on which CENVAT credit can be taken.

From the above provision, it is clear that in case of any dutiable goods

became exempted, the assessee is required to reverse the cenvat credit

in respect of inputs lying in stock or in process or is contained in the final

product as of date of opting for the exemption notification. In terms of

above specific provision, the appellant is required to reverse the credit

attributed to inputs as such, in process, contained in finished gods,

therefore, the appellant have mistakenly reversed 5% in terms of Rule

6(3)(i) of Cenvat Credit Rules, 2004. On realising this mistake they have

reversed Rs. 5,41,069/- on the input, in process, and contained in the

finished goods by following the Rule11(3) they have corrected the 

mistake, therefore, the amount @ 5% of exempted finished goods

reversed by the appellant became excess reversal, hence the same is

liable to be recredited/ refunded to the appellant. The contention of both

the lower authorities as well as the submission of the learned Authorized

Representative is that once the option of Rule 6(3)(i) is availed, the same

cannot be withdrawn. In this regard, I find that as per the specific

provision particularly in a case that the goods which were earlier dutiable

and at interim stage became exempted, the provision which

predominantly apply is Rule 11(3) of Cenvat Credit Rules, 2004.

According to which the appellant is required to reverse the cenvat credit

attributed to the input, in process and/ or contained in finished goods.

The appellant have made good even though at a later stage by reversing

the amount of Rs. 5,40,069/- therefore, the reversal of 5% made by the

appellant is an excess reversal which need to be recredit/ refunded to the

appellant. The Circular relied upon by the Learned Authorized

Representative shall not be applicable in the facts of the present case as

the appellant were required to reverse the cenvat credit in terms of Rule

11(3) of Cenvat Credit Rules, 2004. The Circular applicable only in a case

where the assessee availed option of Rule 6(3)(i) at the time when the

appellant are manufacturing both the category of goods i.e. dutiable and

exempted. In the present case, the fact is different inasmuch as the

dutiable goods became exempted for which Rule 11(3) is applicable,

therefore, the Circular in the peculiar facts of the present case is not

applicable. Moreover, in catena of decision, it was held that giving

options for availing a particular option is procedural requirement and on

failure of the same, the assessee cannot be deprived of choosing any of

the option available in Rule 6(3) and one of the option is reversal of

proportionate credit. For this reason also, the appellant’s excess reversal

of Rs. 3,24,664/- required to be refunded/recredit.

In view of my above observation, I am of the considered view that

the appellant is entitled for recredit/ refund of Rs. 3,24,664/- and interest

thereupon, if any, as per law. Accordingly, the impugned order is set

aside. Appeal is allowed with consequential relief.

(Pronounced in the open court on 23.01.2023)

(RAMESH NAIR)

MEMBER (JUDICIAL)