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)
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