Bajaj Consumer Care Ltd vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. 44/2010 (H-I) CE dated 29/07/2010 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals-I), Hyderabad.]

For approval and signature:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes

BAJAJ CONSUMER CARE LTD D.NO.1-7-264, EMERALD HOUSE, 1ST FLOOR, S.D.ROAD, SECUNDERABAD 500 003 Appellant(s)

Versus

Commissioner of Central Excise, Customs and Service Tax HYDERABAD-I KENDRIYA SHULK BHAVAN, L.B STADIUM ROAD, BASHEERBAGH, HYDERABAD, - 500004 ANDHRA PRADESH Respondent(s)

Appearance:

Mr. LALIT MOHAN CHANDNA, CONSULTANT PLOT NO.3/6, 3-41-61, LANE ADJACENT TO POLICE STATION, WEST MARREDPALLY, SECUNDERABAD - 500026 A.P. For the Appellant

Mr. K.T. Pakshirajan, Asst. Commissioner (AR) For the Respondent

Date of Hearing: 05/06/2015

Date of Decision:

CORAM:

HON'BLE SMT. ARCHANA WADHWA, JUDICIAL MEMBER

Final Order No. 21374 / 2015

Per : ARCHANA WADHWA

The appellant is engaged in the manufacture of ayurvedic medicaments bearing brand name as well as generic medicaments. Whereas branded medicaments are liable to duty of excise, generic are exempted from payment of duty vide Notification No.3/2005.

2. During the period April 2005 to March 2009, the appellant availed CENVAT credit of service tax paid on the Goods Transport Agency (GTA) service and Manpower Recruitment Agency services and as per the Revenue, appellants utilized the same in relation to manufacture of both dutiable as well as exempted goods. As the appellants were not maintaining separate records of input service tax credit utilized for manufacture of both the types of final products, they were issued a show-cause notice dated 16.4.2009 proposing to confirm an amount of 10% of the value of the exempted final product, in terms of the provisions of Rule 6 of CENVAT Credit Rules.

2.1 The appellant during the course of adjudication admitted that they were utilizing GTA services for both dutiable as also exempted final products and they reversed an amount of Rs.552/- being the input credit attributable to the GTA services. As regards Manpower Recruitment Agency services, they contended that such services were being used by them only for the packing, labeling and loading of the dutiable goods inasmuch as their dutiable goods are to the extent of 95% and only 5% exempted goods are being manufactured by them, the unskilled labour supplied to them by the manpower recruitment agency, was not used for the purposes of exempted products. They also assailed the demand on the point of limitation.

3. The lower authorities did not appreciate the above contention of the appellant and held that there is no evidence of the unskilled labour supplied to them having been used only in the manufacture of dutiable items. Further, the lower authorities also relied upon the decision of the Honble High Court of Bombay in the case of Nicolas Piramal (I) Ltd.: 2009 (244) E.L.T. 321 (Bom.), to reject the appellants contention that as they have reversed the proportionate CENVAT credit availed on GTA service they are under no legal obligation to pay 10% of the value of the final product. Accordingly, demand to the tune of Rs.1,63,470/- stand confirmed against them along with imposition of penalty.

Hence the present appeal..

4. After hearing both the sides duly represented by Mr. Lalit Mohan Chandna, Consultant for the appellant and Shri K.T. Pakshirajan, Asst. Commissioner (AR) for the Revenue. I find that admittedly the appellants have reversed the proportionate CENVAT credit in respect of GTA services used for the manufacture of dutiable as also the final product. The reliance by the lower authorities on the decision of Bombay High Court in the case of Nicolas Piramal (I) Ltd. (supra) may not be applicable inasmuch as the said case was dealing with availment of input credit whereas the present case relates to input services, in which case, it is difficult to maintain separate records. Further, the High Court of Karnataka in the case of Himalaya Drugs: 2011 (271) E.L.T. 350 (Kar.) and High Court of Madras in the case of ICMS Corporation Ltd.: 2015 (315) E.L.T. 388 (Mad.) has held that such reversal will amount to as if no credit was availed.

However, though the appellants have contested that they have not used common manpower supply services for exempted goods also but it seems impossible that the unskilled labour supplied by the manpower supplier was used only for the packing, labeling of the dutiable goods. Apart from making a bald statement, the appellant has not produced any evidence to that effect. As such, it has to be held that manpower supply services were used for both the types of goods. Inasmuch as the appellants have not reversed the proportionate CNEVAT credit in respect of the said services, they will be liable to pay 10% of the value of exempted final product.

4.1 However, I find merits in the appellants plea of limitation. Admittedly they were reflecting the entire facts in the returns filed by them to the Revenue. Revenue was aware of the fact that appellant is manufacturing dutiable as also exempted final products and is availing CENVAT credit of service tax paid on the entire services so received by them. Even then no objection was ever raised by them and it was only at the time of audit, that the said legal issue was raised. As such, I am of the view that there is no malafide on the part of the assessee, with an intent to evade payment of duty. The appellants are manufacturing dutiable goods to the extent of 95% and only a very small percentage is of exempted final products, which is clear from the chart of productions for various years, placed on record by the appellant. During the year 2006-07, percentage of production of exempted goods was to the tune of 0.10% and during 2007-08, it was 0.04%. It is only in the year 2009 that the percentage increased to 1.22%. Inasmuch the major part of the appellants final product was dutiable, which was being cleared on payment of duty, the availment of CENVAT credit in respect of various services to the extent of 100%, cannot be held to be reflecting on any malafide on the part of the assessee so as to invoke the longer period of limitation. As such, I am of the view that the demand falling within the limitation period would only survive. The lower authorities would re-quantify the said demand along with interest.

4.2 As the benefit of limitation has been extended to the appellant by observing absence of any malafide, imposition of penalty upon them is not called for. Accordingly, the same is set aside. The appeal is disposed of in above terms.

(Order pronounced in open court on )

ARCHANA WADHWA JUDICIAL MEMBER

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