By TIOL News Service
MUMBAI, DEC 12, 2012: ALMOST all the Central Excise officers have a fetish for numbers. They revel in issuing mind boggling demand notices and confirm them with aplomb. And imposing equivalent penalties is their forte. There was this officer working in the range who used to mention in his resume the figures to the last digit of the demand notices he had issued and which included those based on CERA and Audit objections and was proud to also mention that his bosses had confirmed the same with penalties and interest - no questions asked. This, he felt, boosted his grading and sure it did!
Taking a leaf out of his resume, his bosses too would copy these mesmerizing figures in their resumes and go to town talking about the excellent revenue collections they could cobble up and this, would you believe it, was the hot topic of discussion during the lunch breaks and meetings!
Unfortunately, never did the officer's resume of the subsequent year mention that these 'Godzilla' demands were thrown into the dust bin by the CESTAT for had that been done, their appraisal reports would have been downgraded.
The present proceedings involve one such instance and the rule which is maligned in the proceedings is the ubiquitous Rule 6 of the CENVAT Credit Rules, 2004.
A demand of Rs.297,77,33,460/- (no mistake here) was confirmed by the CCE, Thane-I against the appellant along with equivalent penalty and interest on the premise that the applicants are not maintaining separate accounts for input services which have been used by them for their manufacturing and trading activities. The genesis of this order is a show-cause notice dated 07.10.2011 issued for the period September, 2006 to August, 2010.
The facts of the case are that the applicants are a manufacturer of electronic goods. In the course of their business activity, sometimes they import certain electronic goods, sometimes goods were procured from co-manufacturers and sometimes they manufactured themselves. In short, there are two types of activities i.e manufacturing and trading activities.
The applicants are maintaining accounts for inputs which are used in the manufacturing units and there is no dispute. But for input service credit, the applicant has adopted the following method for availment of credit:
(a) Input service exclusively attributable to the manufacturing the goods, the applicant is taking full credit
(b) Input service credit attributable to trading activity, no credit is taken.
(c) For common inputs service, the applicant adopted a formula to take credit proportionately attributable to manufacturing activity. The applicant did not take any credit on input service attributable to trading activity at all. The amount of input service credit was calculated on the basis of the sale.
The above facts were presented by the appellant before the CESTAT while seeking a stay in the matter. It was also submitted that in the year 2008 an audit was conducted and verification of the method for availment of input service credit was ordered and it was found that the method adopted by them in taking the credit on manufacturing activity is correct. Inasmuch as since the non-availment of input service proportionate credit on the trading activity was known to the department in 2006, the extended period is also not invokable, submitted the applicant.
The Revenue representative submitted that the adjudicating authority had done the right thing.
The CESTAT observed -
"9. Heard both sides. Considered the submissions made by both sides and perused the records. On perusal of the records, we find that the applicants are not taking proportionate credit on input service attributable to trading activity.
10. In view of these observations, we are of the view that as the applicant has not taken credit of common input service attributable to trading activity. In these circumstances, the applicants have covered under Rule 6(1) of CENVAT Credit Rules, 2004 and the provisions of Rule 6(2) of CENVAT Credit Rules, 2004 are not applicable. Therefore, they are not liable to pay 10%/5% of the value of the traded goods.
11. As observed above, the applicant has made out a case for 100% waiver of pre-deposit, accordingly, we do so and waive the requirement of pre-deposit of entire amount of duty, interest and penalty and stay recovery thereof during the pendency of the appeal.
12. Registry is directed to list the matter for final disposal on 12/12/2012."
12/12/12 - Neighbour's envy, owner's pride!
(See 2012-TIOL-1832-CESTAT-MUM)
