Texmo Pipes and Products Ltd. Vs. Commissioner of Central Goods & Service Tax and Central Excise - (Customs, Excise and Service Tax Appellate Tribunal) (14 Feb 2020)

For minor procedural lapse, substantial benefit cannot be denied

MANU/CE/0037/2020

Excise

The Appellant is a manufacturer of dutiable goods-HDPE Pipes/LLDPE Pipes. PVC Moldings, fittings, etc. which are dutiable and also manufacturer of exempt products i.e. Drip Irrigation System and Sprinkler systems. The Appellant was operating or keeping their cenvat account under Rule 6(2) of Cenvat Credit Rules, 2004 maintaining separate accounts of inputs and input services used in dutiable and exempted goods.

The officers of the Department visited the Appellant. During the verification of the goods, it appeared that the Appellant had, including other goods, cleared exempted goods viz. HDPE Sprinkler and Drip irrigation System during the period April, 2015 to March, 2016 without payment of duty/amount under Rule 6(3) of Cenvat Credit Rules. Further, it appeared that the appellant is availing cenvat credit on inputs, input services and capital goods. Pursuant to investigation, it appeared that the appellant has not paid amount equivalent to 6% (reversal of credit) of the value of the exempted goods cleared during 2015-2016, as required under Rule 6(3) (1) of Cenvat Credit Rules.

Accordingly, show cause notice was issued. Show cause notice was adjudicated on contest and the proposed demands were confirmed and appropriated as proposed. Further, equal amount of penalty was imposed for all the three proposals, under Section 11 AC of Central Excise Act, 1944 read with Rule 15 of Cenvat Credit Rules. Being aggrieved, the Appellant is in appeal before present Tribunal.

It is an admitted fact that, the Appellant has kept separate records, as required under Rule 6(2) of inputs and capital goods. Further, the admitted fact is that the Appellant has kept common records of only few common input services, which is of negligible amount and further, the turnover of exempted goods is also negligible as compared to dutiable goods. Further, the Appellant has reversed cenvat credit, on being so advised by the Department of the credit attributable to the exempted goods, under intimation to the Department. Thus, it amounts to not taking of cenvat credit at all with respect to the exempted goods as held by the Hon'ble Supreme Court in the case Chandrapur Magnet Wires (P) Ltd., Nagpur vs. Collector of Central Excise.

So far the amount of Rs. 7,52,318 is concerned, admittedly, the same has been taken by the appellant on the original documents in their possession, but it appeared that the same have been mis-placed and could not be produced by the Appellant during investigation. Cenvat credit cannot be denied as it is held that the substantial benefit should not be denied for small procedural lapse. Further, it has been repeatedly held that, Rule 6(2) read with Rule 6(3) is not the charging section or provision, it is only the mechanism to reverse the cenvat credit involved in the exempt out (finished goods) by way of a convenient formula. Accordingly, the impugned order suffers with impropriety and the same is mis-conceived. Accordingly, this appeal is allowed. The impugned order is set aside. The Appellant is entitled to consequential benefit in accordance with law.

Relevant : Chandrapur Magnet Wires (P) Ltd., Nagpur vs. Collector of Central Excise, Central Excise Collectorate, Nagpur MANU/SC/1061/1996

Tags : DEMAND CONFIRMATION LEGALITY