Dismissed

Commissioner of Central Excise, v. M/s. Spm Industries India Pvt. Ltd.

Telangana HC12 Mar 2014CEA/3/2005

Case brief

AI extract

What is this about?

In this appeal, the High Court affirmed the Central Excise Authorities' order dismissing the department's appeal against an order reversing Cenvat credit. The Court held that since the assessee maintained separate accounts and could clearly trace inputs to exempted products, the entire credit could not be reversed, though on a different factual ground then the department's challenge was rejected.

What did the court decide?

First appeal by the Department dismissed with both questions answered in favour of the assessee.

Commissioner of Central Excise, Vs M/s. Spm Industries… — Cheque Dishonour | Telangana HC (2014)

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IN THE HIGH COURT JUDICATURE, ANDHRA PRADESH AT HYDERABAD

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WEDNESDAY, THE TWELFTH DAY OF MARCH TWO THOUSAND AND FOURTEEN

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PRESENT

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THE HONOURABLE SRI JUSTICE G.CHANDRAIAH AND

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THE HONOURABLE SRI JUSTICE CHALLA KODANDA RAM

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C.E.A. No.3 of 2005

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Between:

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Commissioner of Central Excise, Hyderabad-II, Commissionerate, Hyderabad

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… Appellant And

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M/s. SPM Industries India Private Limited.

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… Respondent

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THE HONOURABLE SRI JUSTICE G.CHANDRAIAH AND THE HONOURABLE SRI JUSTICE CHALLA KODANDA RAM

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C.E.A. No.3 of 2005

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JUDGMENT: (Per the Hon’ble Sri GC, J)

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This Central Excise Appeal is filed raising the two questions of law, which are set out below.

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“(a) Whether the Customs, Excise, Service Tax Appellate Tribunal, South Zonal Bench at Bangalore was right in dismissing the appeal filed by the department by holding that the respondent had the option of reversing the entire credit on the disputed inputs and that the question of demanding 8% of the price of the exempted goods, when the Sub-Rule 3(b) of Rule 6 of Cenvat Credit Rules, clearly says that the manufacturer who has not maintained separate inventory and has taken credit on common inputs to manufacture dutiable and exempted products has no option [other than the exceptions mentioned in sub-rule 3(a)] but to reverse 8% of the price of the exempted goods? And

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(b) Whether the Customs, Excise, Service Tax Appellate Tribunal, South Zonal Bench at Bangalore was right in holding that the issue was already settled in the case of M/s. Glaxosmithkline Consumer Healthcare Ltd, which was decided on the basis of Hon’ble Supreme Court judgment in the case of M/s.Chandrapur Magnet Wires (P) Ltd, is not applicable to the present case.”

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A perusal of the order of the Tribunal would reveal that after hearing the both sides, the Tribunal dismissed the appeal of the Department recording that the said case is covered by the ratio laid down in the case of GLAXOSMITHKLINE CONSUMER HEALTHCARE LIMITED Vs. CCE, VISAKHAPATNAM (Final Order No.350/2004, dated 13.02.2004).

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The said order of the Tribunal is the subject matter of the appeal before

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this Court in CCA. No.1 of 2005, which stands dismissed on 25.10.2013.

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The Tribunal in its order, after referring the judgment of the Supreme Court in CHANDRAPUR MAGNET WIRES LIMITED Vs. COLLECTOR OF CENTRAL EXCISE, NAGPUR^[1] , had held that where the credit taken has been reversed on inputs utilised in manufacturing of the final exempted product stand deleted in the account of the assessee,

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it cannot be said that the assessee has taken credit for the duty paid on the inputs utilised in the manufacture of the final product, which is exempted under Rule 57-A. In that view of the matter, the Tribunal had dismissed the appeal filed by the Department. Further, the first appellant, Commissioner Appeals, referred to the circular No.591/28/2001-Cx, dated 16.10.2001, which reads as under.

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“The matter has been examined in the Board.

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It is stated that the basic principles underlying the Cenvat Scheme is that credit is admissible if duty is paid on final products. Attention is drawn to Sub-Rule (1) of Rule 6 of the Cenvat Credit Rules, 2001, which clearly provides that the Cenvat Credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods, except in circumstances specified in Sub-Rule (2).

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The provisions of Sub-Rule (2) and (3) of Rule 6 provide as to how to deal with and account for the inputs and credit of duty in cases where the inputs are used in manufacture of both dutiable as well as exempted products. It follows from the provisions that if the manufacturer did not fulfil the requirements of either Sub-Rule (2) (i.e. maintaining separate accounts) or Sub-Rule (3) (i.e. paying 8% of total price of exempted goods, other than exemptions specified in clause (a)) then in terms of Sub-Rule (1) the assessee shall not be allowed credit on such quantity which is used in the manufacture of exempted goods. Consequently, where the assessee has not paid the amount, the availment of the corresponding credit on inputs is incorrect. The recovery of such credit taken incorrectly is squarely covered by the provisions of Rule 12 (erstwhile Rule 57I). Necessary action may be taken accordingly.”

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After referring to the above circular, Commissioner Appeals had held as under:

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“In view of the fore going, it is observed that the

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provisions of Rule 57CC(1) of Central Excise Rules, 1944 cannot be applied to the subject clearances of M/s.SPM Instrument India (P) Ltd. The assessee was correct in reversing the credit before effecting the clearances, from November’99 to March’2000, to the Indian Navy and Department of Atomic Energy under Notifications No.64/95 CE, 10/97 CE, at nil rate of duty and the question of demanding an amount of Rs.4,21,193/- under Section 11A and interest there under Section 11AB does not arise. Accordingly, I pass the following order.

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ORDER

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I set aside the order passed by the Assistant Commissioner and allow the appeal filed by M/s. SPM Instrument India Pvt. Ltd. with consequential relief.”

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There is no contra opinion or judgment, which has been brought to our notice to take a contra view. In that view of the matter, we see no reason to interfere with the order of the Tribunal.

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Accordingly, the appeal is dismissed answering both the questions in affirmative in favour of the assessee and against the Revenue. As a sequel, miscellaneous petitions, if any, shall stand dismissed. There shall be no order as to costs.

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____________________________ JUSTICE G. CHANDRAIAH

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__________________________________ JUSTICE CHALLA KODANDA RAM

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Date: 12.03.2014 LSK

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[1] 1996 (81) ELT 3 (SC)

Commissioner of Central Excise, v. M/s. Spm Industries India Pvt. Ltd.

Case brief

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Commissioner of Central Excise, v. M/s. Spm Industries India Pvt. Ltd.

Case brief

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