Larsen & Toubro Limited vs Commissioner Of Central Excise, ...

[Arising out of Order-in-Appeal No. YDB/62/ M-II/ 2010 dtd. 3/2/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone II]

For approval and signature:

Honble Mr Ramesh Nair, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

Larsen & Toubro Limited : Appellants

VS

Commissioner of Central Excise, Mumbai- II : Respondent

Appearance

Shri. Prasad Paranjape, Advcoate for the Appellants Shri. V.K. Shastri, Asstt. Commissioner (A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 24/6/2015 Date of decision: 24/6/2015

ORDER NO.

Per : Ramesh Nair

The appeal is directed against Order-in-Appeal No. YDB/62/ M-II/ 2010 dtd. 3/2/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone-II, wherein Ld. Commissioner (Appeals) upholding the Order-in-Original, rejected the appeal of the appellant.

2. The fact of the case is that appellant had cleared goods at NIL rate of duty to Dept of atomic energy under the provisions of Notification No. 10/97-CE dated 1/3/97. They availed Cenvat credit of the duty paid on account of input used in manufacture of both dutiable and exempted final product. Since they have not maintained separate account for inputs used in manufacture of dutiable final product and exempted product, they had debited 10% of the contract price of the goods (excluding tax) under the provisions of Rule 6(3)(b) of CCR, 2004. They had also collected the said amount from their customer. In the show cause notice, it was alleged by the department that extra charges of 10 % recovered from the customer had increased price of exempted final product and the appellant were required to pay an amount of 10% of the total price including amount of 10%. Accordingly it was proposed to recover an amount Rs. 2,96,640/- being difference between amount equal to 10% of the total price of exempted product (inclusive of 10%) and amount actually debited by the appellant. The adjudicating authority has confirmed the demand alongwith recovery of interest and imposition of penalty of equal amount on the ground that entire money/consideration of the transaction had to be considered as price. Being aggrieved by the said adjudication order, the appellant filed appeal before the Commissioner (Appeals), who upholding the order-in-original rejected the appeal of the appellant, therefore appellant is before me.

3. Shri Prasad Paranjape, Ld. Counsel for the appellant submits that the issue is squarely covered by the larger bench judgment in case of Unison Metals Ltd. Vs Commissioner of C. Ex., Ahmadabad-I, reported in [2006(204) ELT 323 (Tri)] wherein though the issue was demand under Section 11D, the fact was absolutely identical that assesse had paid an amount under Rule 6(3)(b) and collected the same from customers whom the goods were cleared under exemption. He submits that the issue involved in the present case is under identical set of facts of misons case and no demand was made in the case of unison. Therefore demand raised in the present case is not sustainable on this ground alone. He further submits that entire proceedings are on the basis that price of the exempted goods for the purpose of reversal of 10% should be inclusive of the 10% reversal which was collected from the customer. Therefore the issue in dispute is what should be the price for the purpose of reversal of 10% under Rule 6(3)(b). He submits that goods were supplied to the Government Department of Atomic Energy under particular contract.

As per the contract documents, he referred the price which is fixed under the contract and said price is inclusive of 10% reversal under Rule 6(3)(b) and the same contract also has terms which also shows that the reversal of Cenvat on exempted goods shall be paid towards said reversal against documentary evidence. As per this terms of contract, the price is not inclusive of the reversal amount therefore the basic price for which contract was made, alone will be considered as price for calculating 10% reversal under Rule 6(3)(b). He draws my attention to the relevant Rule 6(3)(b) and Board Circular No. 870/08/08-CX dated 16/5/2008 wherein under para 3, the board has clarified that prior to 1/4/2008 the 10% was required to be paid on the price of the exempted goods. From 1/4/2008 the amendment was made in Rule 6(3) and according to which price has been replaced with value, therefore from 1/4/2008 10% was required to be paid on the value of the exempted goods. On this he submits that prior 1/4/2008 it is price on which 10% to be calculated for the reversal. This clearly shows that prior to 1/4/2008 it is the price which attract 10% reversal and not price inclusive of 10% as contended by the department.

He submits that this amendment has significance on the issue. On the issue of limitation he submits that entire period of demand is beyond the normal period of one year and show cause notice has not alleged any ingredient of proviso to 11A such as suppression, collusion etc. Since, there was no allegation of any such act on the part of the appellant invocation of proviso to Section 11A and confirmation of the demand is not legal and proper. He placed reliance in their own case of Honble Supreme court judgment L&T [2007(211) ELT 513(S.C)]. Without prejudice, he submits that their supply is made under legitimate contract to the Government Department of Atomic Energy and the contract clearly shows terms of 10% reversal and payment and reimbursement thereof and also the contract price. Since goods were cleared under exempted Notification No. 10/97-CE, as per the condition of exemption certificate required to be submitted to the department. They have undisputedly produced such exemption certificate to the Jurisdictional superintendent vide their letter dated 8/10/2004. The said exemption certificate bearing number of purchase order under which, clause of 10% reversal and reimbursement thereby has been mentioned.

He also submits that in the monthly returns they have explicitly declared the clearances of goods under this particular notification 10/97-CE. Even the show cause notice also issued on the basis of purchase order that the said purchase order bearing clause of 10% reversal and collection of the same from the customer. In view of these facts, entire information related to removal of this goods under exemption, submission of exemption certificate, reversal of 10% price of the exempted goods, collection of said amount from the customer stand disclosed to the department. Therefore, there is no iota of doubt that the appellant has not suppressed any facts from the department. Therefore, entire demand is barred by limitation, as proviso to Section 11A is not invokable, in these facts and circumstances of the case. On the above submission he prays for allowing the appeal and set aside the impugned order.

4. On the other hand, Shri V.K. Shastri, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that since 10% reversal and calculation thereof is neither duty nor in the nature of other government levies, 10% amount is part and parcel of price of the goods. Therefore price inclusive of 10% collected from the customer should be treated as price of the exempted goods and therefore demand made by the lower authority on the 10% collected by the appellant is correct and legal.

5. I have carefully considered the submissions made by both sides and perused records.

6. The issue to be decided by me that is for the purpose of reversal of 10% whether the basic contract price should be taken or price plus 10% reversal collected should be taken. I find from the contract documents that there is specific price fixed for sale of the goods and in that price there is no addition of this 10% in the form of the price. There is clause in the purchase order that against all the reversal of 10% customer shall pay the same amount to the appellant. In view of this fact contract price is the price and the same should be taken for calculation of 10% reversal required under 6(3)(b). As regard the 10% reversal made by the appellant and even though the same was collected from the customer the same was not retained by the appellant as the same was debited in their Cenvat credit account, therefore in this fact, it could not be said that 10 % reversal is part and parcel of the price of the goods. I have gone through the Rule 6(3)(b) and amendment thereon w.e.f. 1/4/2008 and subsequently clarification issued by the Board vide circular dated 16/5/2008, relevant portion of clarification is reproduced below:

The matter has been examined. Sub-rule (3) of rule 6 of the?3. CENVAT Credit Rules, 2004 has been amended w.e.f. 1-4-2008 to provide for payment of an amount equal to 10% of value of the exempted goods, instead of 10% of the price of the exempted goods as provided earlier. The value is to be determined as per section 4 or 4A of the Central Excise Act, 1944 read with rules made thereunder.

From the above clarification it can be seen that in Rule 6(3) of CCR, 2004, prior to 1/4/2008 the 10% reversal is required to made on price of the goods and subsequent to 1/4/2008 it was amended and according to which 10% reversal was to be made on the value of the exempted goods. It was also clarified that value which is determined as per Section 4 or 4(A) of Central Excise Act, 1944, read with Rule made under. Prior to 1/4/2008 the price of which 10% reversal was to be made had no relevance to the Section 4 or 4(A) and it is also fact that term price mentioned in the Rule 6(3)(b) it was not defined in the Cenvat Credit Rules. In this position, I am of the view that price is to be taken as provided in the contract and as per contract; price does not include 10% reversal and collection thereof. Therefore 10% reversal made by the appellant on basic contract price is correct and legal. As regard the judgments of the larger bench of this Tribunal in case of Unison Metals Ltd. (supra) as cited by the Ld. Counsel, on careful reading of the judgment, I find that issue involved in the said case was whether the reversal and collection of 10% from the customer can be recovered under Section 11D. However fact that 10% reversal of basic price and collection of the same from the customer are identical fact of the present case. In the case of Unison Metals Ltd. (supra) after having similar fact no dispute was raised on the price of the exempted goods on which 10% reversal required to be made under Rule 6(3)(b). Therefore I am of the view that the judgment of larger bench also supports the case of the appellant. I am deciding the matter on merit of the issue involved; hence, I am not going into the issue of time bar. In view of my above discussion, I am of the view that the appellant have correctly debited the liability of 10% amount under Rule 6(3)(b), therefore no further demand should have been confirmed. The impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.

(Dictated in court)

Ramesh Nair Member (Judicial)

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