Poorna Graphics vs Commissioner Of Central Excise ...

[Arising out of Order-in-Appeal No. 21-2012 dated 25/01/2012 passed by CCE(Appeals-I), Bangalore]

For approval and signature:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL 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?

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

POORNA GRAPHICS GANESHA TEMPLE COMPOUND, IIIRD CROSS, SINGHAINPALYA, MAHADEVAPURA POST, BANGALORE 560 048 Appellant(s)

Versus

Commissioner of Central Excise ,Customs and Service Tax BANGALORE-I NULL POST BOX NO 5400...CR BUILDINGS, BANGALORE, - 560001 KARNATAKA Respondent(s)

Appearance:

Shri M.A. Narayan, Advocate CUSECS CONSULTNANTS FLAT 'A' GR, FLOOR, "SEVEN HILLS EXCELLENCY" #33, 2ND CROSS, SBM COLONY, BRINDAVAN NAGAR, MATHIKERE, BANGALORE - 560054 KARNATAKA For the Appellant

Shri Ajay Saxena, Commissioner(AR) For the Respondent

Date of Hearing: 16/09/2015

Date of Decision: 16/09/2015

CORAM:

HON'BLE SHRI ASHOK K. ARYA, TECHNICAL MEMBER

Final Order No. 21937 / 2015

Per : ASHOK K. ARYA

Both the sides have been heard in detail.

2. The matter concerns with the obligation under Rule 6(2) of CENVAT Credit Rules, 2004 on the manufacturer assessee who is producing both types of goods viz. dutiable as well as non-dutiable / exempted i.e. goods attracting nil rate of duty. In this case, the appellant had been manufacturing both the dutiable items viz. paper tags, labels, paper cartons and the non-dutiable goods attracting nil rate of duty namely brochures, trade/advertising materials and catalogues etc.

3. The Department says that the appellant viz. M/s. Poorna Graphics were obliged to maintain separate accounts for dutiable and exempted goods as per the provisions of Rule 6(2) of CENVAT Credit Rules and they were not found to have maintained so.

4. The appellant viz. M/s. Poorna Graphics however argues that they had separate accounts and the Department has not come forward to examine and check their said separate accounts. The learned advocate for the appellant Shri M.A. Narayan says that the statement recorded by the Department in this regard on 09/07/2008 was clarified by them on 24/10/2008 through a letter wherein they have clearly stated that the accounts in respect of the dutiable goods were maintained and they were stored as far as possible to one side of the storage area and they had the records for the utilisation for the said CENVAT credit availed goods. The learned advocate refers to the decision of the CESTAT in the case of Shreyans Industries Ltd. Vs. CCE, Jalandhar [2010(249) ELT 301 (Tri. Del.)] saying that Rule 6(2) of CENVAT Credit Rules does not specify the method of maintaining separate accounts and their way of maintaining of the said accounts is to be taken as fulfilment of requirements of Rule 6(2) of CENVAT Credit Rules 2004. He refers to para 19 of the above decision, which is as under:-

19.?From the above findings read with the contents of the show cause notice, quoted above, it cannot be said that the appellants have not maintained the accounts in respect of cenvated inputs and non-cenvated inputs. What was necessary for the authorities to ascertain from his account, whether it discloses the accounts pertaining to the receipt, consumption and inventory of the inputs used in the manufacture of dutiable products separately from those used in the manufacture of exempted products. Indeed, the impugned order nowhere discloses any such exercises having been done by the authorities. On the contrary, the findings in the impugned order is to the effect that, the case of the Department is that reported maintenance of separate accounts is assumption based only and not on factual basis....... From the above, it is clear that not only the inputs which are utilized in the manufacture of exempted goods should be identifiable or its quantity should also be ascertained at the first stage itself i.e at the time of receipt of inputs which are used in the manufacture of exempted goods. Though, apparently, the said findings have been arrived at without analyzing the accounts and ascertaining, whether the same discloses separately the receipt, consumption and inventory of the inputs utilized in the manufacture of dutiable products from those utilized in exempted goods products. In the absence of such exercise, in our considered opinion, the authority was not justified in arriving at the conclusion that the only option open for the appellants is to avail exemption in terms of sub-rule (3)(b) of the said rules. On this count itself, the impugned order is liable to be set aside and the matter is remanded to the Commissioner to consider whether the accounts maintained by the appellants satisfy the requirement of Rule 6(2) bearing in mind the observations hereinabove.

5. Learned Commissioner(AR), Shri Ajay Saxena, appearing for the respondent viz. CCE, Bangalore vehemently argues that this is the case where Rule 6(2) of the CENVAT Credit Rules has not been followed and the appellant has to pay 10% of the value of the exempted goods as the duty of Central Excise. The learned AR has referred to the decision of CESTAT, Mumbai in the case of R.R. Paints Pvt. Ltd. Vs. CCE, Mumbai [2013(288) ELT 289 (Tri. Mumbai)] saying that when the appellant availed input credit for both dutiable as well as exempted products and did not maintain separate accounts, they were required to pay as per the provisions of Rule 6(3) of CENVAT Credit Rules an amount equivalent to 10% of the value of the exempted goods as duty. He also says that this decision of the CESTAT, Mumbai has been upheld by Honble High Court of Mumbai in case of R.R. Paints Pvt. Ltd. Vs. CCE, Mumbai-III [2014(33) STR 156 (Bom.)].

6. From the facts and the pleadings by both the sides, it emerges that the main crux is whether the appellant has maintained separate accounts as required under Rule 6(2) of CENVAT Credits Rules 2004?. The appellants argue that vide their letter dt. 24/10/2008, they clarified that they were maintaining accounts in respect of dutiable goods but the Department instead of verifying their submission of 24/10/2008 issued them a show-cause notice on 24/08/2009 and thereafter adjudicated the show-cause notice confirming the demand of duty of Rs.7,10, 227/- along with interest and imposing equivalent amount of penalty which was confirmed by the Commissioner(Appeals) also by an order dt. 25/01/2012.

7. The learned advocate for the appellant has also argued that they had two sources of procurement of raw materials, one from open market and another from registered manufactures and dealers who were giving them duty paid documents. He says that the goods purchased from open market on which they were not able to take CENVAT credit were in sufficient quantity to manufacture their exempted category of goods. He cited the decision of CESTAT, Delhi in the case of Prerna Syntex Vs. CCE, Jaipur-I [2015(318) ELT 474 (Tri. Del.)] arguing that as their open source raw material were more than sufficient to manufacture exempted goods, in terms of this decision the demand of duty against them cannot be sustained.

8. After careful consideration of above facts and submissions of both the parties, I am of the view that this matter deserves to be remanded to the original adjudicating authority who is to verify the submissions of the appellant that they were maintaining separate accounts in terms of Rule 6(2) of CENVAT Credit Rules and liability of payment of duty under Rule 6(3) of CENVAT Credit Rules does not arise against them. It is made clear here that till the verification is made and fresh decision is arrived at by the original adjudicating authority, there will not be any change in respect of the status of the predeposit made by the appellant in terms of the CESTAT, Bangalores Stay Order No.1704/2012 dt. 24/09/2012. It is also ordered that the original adjudicating authority must ensure verification of the submissions made by the appellant within six weeks of the issue of this order and thereafter the case must be adjudicated by him/her within next six weeks. It is needless to observe that the appellant will have full opportunity of submission of the facts and evidences concerning the subject matter and it would also be obligatory on their part to cooperate with the Department fully in this regard.

9. The appeal is disposed of by way of remand in above terms.

(Order pronounced and dictated in open court)

ASHOK K. ARYA TECHNICAL MEMBER

Raja.

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