By TIOL News Service

MUMBAI, APRIL 24, 2016: THE  assessee is engaged in the manufacture of Organic Chemicals viz. Glacial Acetic Acid, Ethyl Acetate, Acetic Anhydride and Piperidine.

The appellant used molasses as an input in the manufacture of Rectified spirit and Extra Neutral Alcohol. Since both the products were exempt, they reversed proportionate CENVAT Credit @ Rs. 750/- PMT used in the manufacture of products in question in terms of Rule 6(3)(ii) of the CCR, 2004 during the period April 2009 to September 2009.

Subsequently, the appellant submitted a refund claim ofRs.17,29,019/- in terms of s.11Bof CEA, 1944 on the premise that they had reversed credit in excess in terms of Rule 6(3) of CCR, 2004. Inasmuch as it was their contention that they should have paid only an amount @5%/10% of the value of the exempted goods and, therefore, the difference between the amount paid and that payable is sought as refund.

The claim was rejected on the ground that appellant had correctly reversed the proportionate CENVAT credit by availing the option provided under Rule 6(3)(ii) of CCR, 2004.

As the Commissioner (A) upheld this order, the appellant knocked the doors of the CESTAT.

The Single Member Bench while rejecting their appeal inter alia  observed -

"It was appellant who opted to pay proportionate Cenvat credit on their own. In Rule 6(3) two options are available i.e. (1) payment of 5%/10% of the value of exempted goods and (2) proportionate Cenvat Credit attributed to the inputs consumed in the exempted goods. Explanation (1) to Rule 6(3) is very clear, which provides that in a financial year once any particular option is availed, the same cannot be withdrawn, that means when the assessee has availed option for payment of proportionate credit as provided under Rule, they are not allowed to change the option and claim that they want to pay 5%/10% of value of the exempted goods, therefore the refund of differential duty is not admissible."

We reported this order as 2016-TIOL-2026-CESTAT-MUM .

Unhappy with this order, the assessee challenged the same before the Bombay High Court and which appeal was admitted.

After narrating the facts in detail, the High Court noted that the CESTAT in paragraph 6 of its order rendered a finding entirely agreeing with the Commissioner (Appeals) and reproducing the finding from the Appellate Authority's order and endorsing its reliance on Explanation1 to Rule 6(3).

It is further observed -

“…We have not seen any independent application of mind by the Tribunal. The Tribunal was expected, as the last fact finding authority, to render specific finding. We do not think that the case could have been disposed of even if the revenue involved was not substantial, by a mere endorsement of the Appellate Authority's finding, particularly on the interpretation of the Rule prevailing at the relevant time. The Tribunal is not expected to endorse legal findings by the Adjudicating Body/Authority and that of the First Appellate Authority. Since the Tribunal comprises of both a Judicial Official and an Administrative Member, it is expected to apply its independent mind and particularly on the question/issue of interpretation of the Rule. This has precisely not been done in the instant case.”

The CESTAT order was quashed and the appeal was restored to the file of the Tribunal for a decision afresh.

(See 2018-TIOL-770-HC-MUM-CX)