Commissioner Of Central Excise & S.T., ... vs M/S. Ratnamani Metals & Tubes Limited

(Arising out of OIA-167-169/2007/COMMR-A-/RAJ dated 26.07.2007, passed by Commissioner (Appeals) Central Excise & Service Tax, Rajkot)

Commissioner of Central Excise & S.T., Rajkot : Appellant (s)

VERSUS

M/s. Ratnamani Metals & Tubes Limited : Respondent (s)

Represented by :

For Revenue (s) : Shri Lalatendu Patra, Authorised Representative For Respondent (s) : Written submission

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

1 Whether Press Reporter 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 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

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Hon'ble Member (Technical)

Date of Hearing / Decision : 31.08.2015

ORDER No. A/11244/2015 Dated 31.08.2015

Per : Mr. P.K. Das;

Revenue filed this appeal against the order of the Commissioner (Appeals), where the adjudication order was set-aside to the extent of deduction of claim from the PLA amount and allowed the appeal filed by the Respondent with consequential relief.

2. None appears on behalf of the Respondent. There is no application for adjournment.

3. After hearing the learned Authorised Representative and on perusal of the records, we find that the respondents were engaged in the manufacture of Stainless Steel Pipes (Welded and Seamless) and Carbon Steel Pipes (Saw Pipes and ERW pipes) classifiable under Chapter 73 of the schedule to the Central Excise Tariff Act, 1985. Their unit was setup in the Kutch district of Gujarat after 31.07.2001 and availing the benefit of Notification No. 39/2001-CE dated 31.07.2001. Respondent filed three separate applications for re-credit of the amount in their PLA paid by cash in respect of the goods cleared during three months from July 2006 to September 2006. The adjudicating authority partly allowed the refund claims. Respondent filed appeal before the Commissioner (Appeals). By the impugned order, Commissioner (Appeals) allowed the appeal filed by the respondents as stated above.

4. The main contention of the learned Authorised Representative on behalf of the Revenue is that, Clause 1A of the notification stipulates that the manufacturer first utilise the whole of the CENVAT credit for the goods cleared during such months and pays only the balance amount in cash which is refundable. It is contended that the Respondent erroneously availed CENVAT credit for payment of service tax on Goods Transport Agency services used in the output services, which is not admissible under the Cenvat Credit Rules, and therefore, proportionate amounts were deducted from the refund claims. He submits that the Commissioner (Appeals) accepted in his order that notification would be allowed for payment of duty only for clearance of final products and it will not be available on output services. In the instant case, the Respondent used the CENVAT credit in output services and the adjudicating authority has rightly deducted the amount.

5. We reproduce below Clause 1A of the notification, as under:-

1A In cases where all the goods produced by a manufacturer are eligible for exemption under this Notification, the exemption contain in this Notification shall be available subject to the condition that, the manufacturer first utilize whole of the CENVAT credit available to him on the last day of the month under consideration for payment of duty on goods cleared during such month and pays only the balance amount in cash.

We find that the benefit of exemption notification would be extended on the condition that manufacturer first utilise the whole of credit available to them and pays only balance amount by cash, which is refundable. In the instant case, according to the adjudicating authority, the Respondent is not eligible to utilise the CENVAT credit for payment of GTA services for outward transportation services. We find, this issue is no more res-integra in view of the decision of the Hon'ble Gujarat High Court in the case of CCE & Cus. vs. Parle Products Pvt. Limited  2010 (258) ELT 485 (Guj.). The other issue is that the adjudicating authority disallowed CENVAT credit utilised for outward transportation. No proceeding was initiated against the denied cenvat credit and Commissioner (Appeals) observed that the exemption notification would apply only in respect of utilisation of the CENVAT credit. It is further observed that if at all, there is a case of wrong utilisation of CENVAT credit, right course of action would have been initiation of proceedings under the provisions of Central Excise Act, 1944 read with Cenvat Credit Rules, 2004. There is no dispute that, no proceeding was initiated for deduction of CENVAT credit, therefore, benefit of the exemption notification can not be denied. The relevant portion of the findings of the Commissioner (Appeals) is reproduced below:-

14. As regards second issue regarding correctness of lower authoritys decision to restrict the claims of the appellant on the ground of irregular availment/ utilisation of CENVAT credit on GTA outward transportation service, I find that, if at all there is a case of wrong utilisation of CENVAT credit, the lower authority has to initiate action and invoke the provisions of CENVAT Credit Rules and decide independently, but the lower authority cannot deny the refund of amount paid from PLA under any of the provisions as the scheme under the notification. The dispute on Cenvat admissibility is an independent scheme and has separate set of procedures. The right course of action for disallowance and consequent recovery of wrong availment / utilisation of Cenvat credit would have been initiation of proceedings under the provisions of Central Excise Act, 1944 read with Cenvat Credit Rules, 2004. I find that the notification does not lays any condition whereby for the sake of wrong utilisation of Cenvat credit, the amount paid from PLA is restricted from being re-credited. I further find that, the lower authority in his re-credit order No. 39/2006-07 has also deducted the claim of the appellant to the extent of Rs. 1,616/- which was stated to be over-payment through PLA and not refundable under the notification. This finding of the lower authority also appears to be incorrect in as much as the notification allows the manufacturer, on exercising his option, to take credit of the amount of duty paid during the month under consideration, in his account current maintained by him and utilise the same for payment of duty in subsequent months, and such payment should be deemed to be payment in cash. Thus, whatever amount is paid through PLA for clearance of final products in terms of the notification, it becomes eligible for being taken as re-credit. Therefore, notwithstanding the discussion made in Para 12 & 13 above, the decision of lower authority to the extent of restricting the claims of the appellant is beyond the scope of the notification and has no legal support and therefore, liable to be set-aside. The appellants are eligible for the refund of full amount paid in PLA for the month of July 2006, August 2006 and September 2006 as they have fulfilled the conditions of the said notification.

6. The Hon'ble Gujarat High Court in the case of Parle Products Pvt. Limited (supra) observed as under:-

7. It is also an accepted fact that in so far as payment of Central Excise Duty, even in terms of the Notification, has been made and there is no default. Therefore, it is incorrect to state that there is breach of any condition so far as Notification is concerned. It is not as if the amount which was payable towards Central Excise Duty has been diverted towards payment of service tax. At the cost of repetition it is required to be recorded that a far larger sum was available in the Cenvat credit account, the amount of service tax which was paid was Rs. 20,19,827/- against total credit in the Cenvat credit account to the tune of Rs. 2.7 crores. Thus no prejudice is shown to have been caused to the revenue in any manner whatsoever.

7. In view of the above discussion, we do not find any reason to interfere the order of the Commissioner (Appeals). Accordingly, the appeal filed by the Revenue is rejected.

(Dictated and pronounced in the Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial) ..KL

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