By TIOL News Service

KOLKATA, AUG 30, 2013: THE applicants are engaged in the manufacture of finished goods viz. Coke. In the manufacture of the said finished goods, various inputs were used on which they avail CENVAT credit. During the process of manufacture of said finished goods, exempted products viz. Coal Tar and coke oven gas also emerge. Since the applicants were not able to maintain separate accounts of the inputs used in or in relation to the manufacture of dutiable products i.e. coke and exempted products viz. Coal Tar and Coke Oven Gas, they were paying 8%/10% of the price of the exempted goods as per sub-rule (3) of Rule (6) of CENVAT Credit rules, 2004.

W.e.f. 01.04.2008, the Rule 6 of CCR, 2004 was amended, and under clause (i), the earlier position has been continued. But, under Clause (ii), the assessee is given an option to pay an amount equal to the CENVAT Credit attributable to the input and input services used in or in relation to the manufacture of exempted finished goods by following the procedure prescribed under Sub-rule (3A) of said Rule 6 CCR, 2004. Since the relevant data relating to the CENVAT credit attributable to the inputs used in the exempted products were not readily available with the applicant as on 1/4/2008 they could not exercise their option at the beginning of the Financial year. However, after collecting the necessary data, on 29/5/2008, the applicant wrote a letter to the Range Superintendent exercising their option as laid down under sub-rule 3(A) of Rule 6 of CENVAT Credit Rules, 2004. This request was rejected by the Department on June 5, 2008.

Nonetheless, the appellant went ahead and paid the attributable CENVAT credit in respect of inputs/input services used in the manufacture of the exempted finished goods by following the sub-rule (3A) procedure. This apparently, the department did not find palatable and, therefore, proceedings were initiated and a demand of Rs.4.35 crores was confirmed along with an equivalent penalty by the CCE, Jamshedpur.

Before the CESTAT, the appellant submitted that merely because in the initial two months, they have paid 10% of the price of the exempted goods, it could not be construed that they have exercised option to discharge their obligation under clause (i) of sub-rule (3) of Rule 6 of CENVAT Credit rules, 2004. In support, they referred to the Larger Bench decision in Ankit Packaging Ltd. Vs. CCE, Hyderabad - (2004-TIOL-54-CESTAT-DEL-LB).

The Revenue representative submitted that Sub Rule (3) of Rule 6 of CCR, 2004 is specific, in the sense that the applicant is required to follow either of the proceduresi.e clause(i) or (ii) as laid down under the said Rule; that if a procedure has been followed, the same cannot be abruptly changed, in the same financial year, in view of the Explanation-I to clause (ii) to sub-rule 3 of said Rule 6 of CCR, 2004. In the instant case by choosing to discharge 8%/10% of the price of the exempted products at the beginning of the Financial year, the Applicant had exercised their option under clause (i) and hence they should not be allowed to change during the same financial year. It was also submitted that even if there is a strong prima facie case in favour of the applicant, in view of the principles of law laid down for disposal of the stay petitions in cases of M/s.   Benara Valves - (2006-TIOL-156-SC-CX),   Mayo College General Council - (2012-TIOL-878-HC-RAJ-ST) and Sri Chaitanya Educational Committee - (2011-TIOL-147-HC-AP-ST),   the applicant should be directed to deposit the confirmed amount to safeguard the interest of Revenue.

The Bench observed -

“4. …We find that the limited issue involved in the present case is availing of the benefits of procedures laid down under clause (i) or Clause (ii) of the amended Sub-Rule (3) of Rule 6 of the CENVAT Credit Rules, 2004 brought into force w.e.f. 01/4/2008. It is the case of the Revenue that once the assessee continues to pay 10% of the price of the exempted goods at the beginning of the Financial year, without exercising option to reverse proportionate credit under clause (ii) of Sub-Rule (3) of Rule 6 of CCR, 2004, then, in the same financial year, he cannot be allowed to resort to clause(ii) of Sub-Rule (3) of Rule 6 of CCR, 2004. The contention of the applicant is that since they have not exercised any option for availing the benefit under Sub-Rule (i), but paid 8%/10% of the price of the exempted goods due to non-availability of data, they cannot be precluded in exercising their option under Clause (ii) during the same financial year in view of the judgment of the Larger Bench's decision in the case of Ankit Packaging Ltd. (supra). Undisputedly, the applicant has made a request to the Department seeking permission to exercise their option under Clause (ii) of Sub-Rule (3) of Rule 6 of CCR, 2004 on 29th May, 2008. Also, we find that to exercise option under Sub-Rule (ii), mere exercise of such option is not enough but the conditions/ procedure laid down under Sub-rule 3 (A) of said Rule 6 is required to be followed by furnishing the details mentioned therein. Prima facie, in the present case, we find that after availability of necessary data necessary to exercise option under clause (ii), the applicant, made an application on 29th of May, 2008 complying with the conditions prescribed under Sub-Rule 3A. In view of the decision of the Larger Bench in Ankit Packaging case(Supra), prima facie, we are of the opinion that mere discharging 10% of the price of the exempted goods due to non-availability of data at the beginning of the Financial year, would not disentitle them in exercising their option later during the same financial year under clause (ii) of Sub-Rule (3) of Rule 6 of CENVAT Credit Rules, 2004….”

Holding that the applicant had madeout a prima facie case for total waiver of pre-deposit of adjudged dues, the Bench granted a stay in the matter and allowed the stay petition.

(See 2013-TIOL-1287-CESTAT-KOL)