Coromandel Fertilizers Ltd vs Commissioner Of Central Excise

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH CHENNAI

Appeal No.E/S/41017/2014 & E/40773/2014

[Arising out of Order-in-Original No.26/2013 dt.29.11.2013 passed by the Commissioner of Central Excise, Chennai-I]

Coromandel Fertilizers Ltd. Appellant

Versus

Commissioner of Central Excise, Chennai-I Respondent

Appearance:

Shri N. Venkataraman, Senior Advocate For the Appellant

Shri B. Balamurugan, AC (AR) For the Respondent

CORAM :

Honble Shri R. Periasami, Technical Member Honble Shri P.K. Choudhary, Judicial Member

Date of Hearing/Decision : 10.6.2015

FINAL ORDER No.40621/2015

Per R. Periasami

As the issue lies on a narrow compass, with the consent of both sides, after dispensing with predeposit, the main appeal itself is taken up.

2. The issue relates to reversal of input service credit used in exempted as well as dutiable final products. The appellants are manufacturers of fertilizers which are fully exempted. During the course of manufacture of fertilizer, a bye-product viz. Phospho Gypsum emerged and it was cleared on payment of duty. The adjudicating authority in his order demanded an amount of Rs.56,69,63,886/- being 8% & 10% of the value of exempted goods for the period from December 2004 to February 2008 and also imposed equal penalty under Rule 15 (2) of CCR, 2004.

3. Ld. Senior Counsel representing for the appellant submits that as per para-5.1, pages 9,10 of the OIO, the adjudicating authority in his finding has held that input services in question covered in Annexure I & II to SCN were used by appellants exclusively in relation to manufacture of exempted goods and services utilized in fertilizer plant. Since the adjudicating authority conclusively held that these services are exclusively used in exempted final products, they have to reverse the entire credit as per Board's circular dt.9.10.2003 and demanding amount on 10% of value of final products not sustainable. As per amended CCR they have already reversed the entire credit along with interest. In terms of retrospective amendment made in Section 73 (1) of Finance Act, they have filed application dt. 19.8.2010 before the Commissioner with full details along with other relevant records to consider the application. Without considering the application, the adjudicating authority proceeded with SCN and passed the impugned order. They filed the application with the same adjudicating authority and it is stated at para 8.1 of the impugned order that appellants have not obtained an order from the Commissioner on the application. The application is still pending before the very same adjudicating authority who has passed the impugned order. Since they have already reversed the entire credit along with interest, he pleaded for remand of the matter to the adjudicating authority to dispose of the application. He also submits that in view of retrospective amendment even if the input services used for both exempted and dutiable goods, they are required to reverse only the proportionate credit.

4. On the other hand, Ld.A.R reiterates the finding of learned Commissioner. He submits that appellants are not eligible for credit which they have already reversed. What is demanded by the adjudicating authority is on input service used in both exempted as well as dutiable goods as they have not maintained separate accounts. He also submits that application submitted by appellant was not brought to the knowledge of adjudicating authority. Therefore, he rightly demanded 8% & 10% of the value of exempted goods. He relied on the Hon'ble Bombay High Court's decision in the case of CCE Thane Vs Nicholas Piramal (India) Ltd.  2009 (244) ELT 321 (Bom.)

5. After hearing both sides, prima facie, we find that the issue relates to reversal of cenvat credit availed on input services used for manufacture of both exempted and dutiable final products under rule 6(3) (b) of CCR. The relevant findings recorded by the adjudicating authority at para 8.1 of the impugned order is reproduced below:-

"8.1 I don't find that in the instant case, the assessee has obtained such an order passed by the Commissioner to enable me to factor in the extent of the reversal of duty and interest paid to grant the necessary relief claimed in the current proceedings. I find that obtaining of such an order involves a separate line compliance which has not been done by the assessee as of now, for me to consider the same in these proceedings. I also do not find it possible to set-off the amount of Rs.21,54,969/- claimed to have been paid by the assessee towards the reversal of credit against the demand made in the show cause notice. I must therefore think that, in the absence of such a proof/reference before me, I am not in a position to consider the request of the assessee in quantitative terms to accept the same as sufficient compliance in place of the quantum of the credit for recovery , demand of interest and penalty proposed in the show cause notice. Further, as far the question of reversal of credit after the goods are cleared without payment of duty in which the said inputs or input services are used, it has been clearly held that the case of Nicholos Piramal India Ltd. by the Hon'ble Bombay High Court that, in the absence of separate payment of 10% which is mandatory, it cannot be whittled down by reversal of equivalent credit. The above views are also held by the Hon'ble SC in the case of Balarpur Paper Industries Ltd. and/ relied upon by the Hon'ble High Court of Madras in the case of Commissioner of Central Excise, Coimbatore Vs. CESTAT, Chennai. In the light of the above, I am unable to accede to the request of the assessee to consider the amendment of Rule 6 and grant the consequent relief claimed under it."

It is evident that the adjudicating authority has stated that the application filed by the appellant not produced any order against the application and failed to consider the retrospective amendment. Further, he also held that input services availed by the appellants were used exclusively in the manufacture of exempted goods i.e. fertiliser plant. If the appellants have used the input services only for exempted final products, as per the Board's circular No.754/70/2003 dt. 9.10.2003, appellants are not entitled for cenvat credit and they are liable to reverse the entire credit. If the appellants used the input services for both dutiable as well as exempted products as manufactured and cleared Phospho Gypsum on payment of duty, appellants are entitled to reverse proportionate credit as per retrospective amendment to Section 73 w.e.f. 10.9.2004 and they submitted application dt. 19.8.2010 before Commissioner of Central Excise immediately after retrospective amendment came into effect. Sub-Section (2) of amended Section 73 of Finance Act clearly stipulates that appellants to make an application before the Commissioner within a period of 6 months from the date on which Finance Bill, 2010 receives the assent of the President.

Sub-Section (3) stipulates that Commissioner of Central Excise shall examine the application and verify the correctness of the amount paid within a period of 2 months from the date of receipt of application or demand the differential amount, if the amount paid is less than payable. It is evident from the records that same adjudicating authority at para 8.1 clearly recorded that appellant had not obtained an order from the Commissioner in terms of sub-section (3) of Section 73. We find that the adjudicating authority and the authority to decide the application is happened to be one and the same jurisdictional Commissioner of Central Excise. The adjudicating authority ought to have considered their application before deciding the SCN. On perusal of the application dt. 19.8.2010, appellants have already paid an amount of Rs.19,17,821/- and interest of Rs.2,87,494/- plus additional interest of Rs.2,43,492/- which is certified by the Chartered Accountant by certificate dt. 5.8.2010 and another certificate dt. 20.12.2010. Accordingly, we find that appellants have complied with entire reversal of cenvat credit along with interest.

Considering the above facts that application made under sub-section (2) of Section 73 is still pending before the adjudicating authority, the case needs to be remanded to the adjudicating authority. Accordingly, the impugned order is set aside and the appeal is remanded to the Commissioner of Central Excise with a direction to consider the application dt. 19.8.2010 and the records already submitted and decide the issue on merits. Adjudicating authority is directed to give a reasonable opportunity to the appellant before disposing the application. Appeal is allowed by way of remand in the above terms.

(Dictated and pronounced in open court)

(P.K. CHOUDHARY) (R. PERIASAMI) JUDICIAL MEMBER TECHNICAL MEMBER

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