Calcutta High Court
And Service Tax vs M/S. Indian Oil Corporation on 28 March, 2023
OD - 6 to 10
IN THE HIGH COURT AT CALCUTTA
Special Jurisdiction
ORIGINAL SIDE
CEXA/22/2022
IA No.GA/1/2022
GA/2/2023
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX
-Versus-
M/S. INDIAN OIL CORPORATION
LTD. REFINERY DIVISION
CEXA/23/2022
IA No.GA/1/2022
GA/2/2023
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX
-Versus-
M/S. INDIAN OIL CORPORATION
LTD. REFINERY DIVISION
CEXA/24/2022
IA No.GA/1/2022
GA/2/2023
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX
-Versus-
M/S. INDIAN OIL CORPORATION
LTD. REFINERY DIVISION
2
CEXA/25/2022
IA No.GA/1/2022
GA/2/2023
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX
-Versus-
M/S. INDIAN OIL CORPORATION
LTD. REFINERY DIVISION
CEXA/26/2022
IA No.GA/1/2022
GA/2/2023
COMMISSIONER OF CENTRAL EXCISE
AND SERVICE TAX
-Versus-
M/S. INDIAN OIL CORPORATION
LTD. REFINERY DIVISION
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
Date : 28th March, 2023
Appearance :
Mr. Bhaskar Prasad Banerjee, Adv.
Mr. Tapan Bhanja, Adv.
...for the appellant
Mr. Saurabh Bagaria, Adv.
Mr. Rites Goel, Adv.
...for the respondent.
The Court : There is a delay of 137 days in filing the
appeals.
We have heard Mr. Bhaskar Prasad Banerjee, learned
counsel for the appellant and Mr. Saurabh Bagaria, learned
Advocate for the respondent and perused the averments set out
in the affidavit filed in support of the application for
condonation. We find sufficient cause has been shown for not
preferring the appeal within the period of limitation.
Accordingly, the application for condonation of delay
is allowed and the delay in filing the appeals is condoned.
These appeals filed by the revenue under Section 35G
of the Central Excise Act, 1944 (the 'Act' in short) are
directed against the final order dated 2nd February, 2022
passed by the Customs, Excise and Service Tax Appellate
Tribunal, Kolkata (the Tribunal) by which the appeals filed by
the appellant/revenue were dismissed.
The Revenue has raised the following substantial
questions of law for consideration:
(i) Whether the Learned Tribunal erred in law in
not appreciating the grounds made out by the
Department and relevant provisions of the
Cenvat Credit Rules, 2004 and relying upon the
decisions in the case of Tiara Advertising and
the certificate of Chartered Accountant, has
passed the impugned order which is not
maintainable in the facts of the case ?
(ii) Whether the Learned Tribunal is justified in
holding that the appellant had taken credit on
common inputs and input services only to the
extent of 85% based on the certificate issued
by their Chartered Accountant when such CA
certificate does not mention any reference to
credit reversal and/or forgone to the extent
of 15% is respect of inputs for the period
from April, 2006 to March, 2009 and whether
the basis of relying on the said CA
certificate, which culminated into a final
decision by the Learned Tribunal is erroneous,
perverse and wrong ?
(iii) Whether in the context of the above the
Learned Tribunal has failed to appreciate
that the respondent had not fully complied
with the requirement of the provisions of Rule
6(3)(ii) of the Cenvat Credit Rules, 2004 for
the period from April, 2006 to March, 2009 ?
(iv) Whether the Learned Tribunal erred allowing
theappeal of the respondent by relying on the
judgment of the Hon'ble Telangana High Court
in the case of Tiara Advertising v. UOI [2019
(30) GSTL 474 (Telangana)] when the revenue
challenged the decision by filing a Special
Leave Petition being Special Leave Petition
(Civil) Diary No(s).23441/2020 and the said
issue is pending consideration by the Hon'ble
Supreme Court ?
We have heard Mr. Bhaskar Prasad Banerjee, learned
standing counsel assisted by Mr. Tapan Bhanja, learned Advocate
for the appellant/revenue and Mr. Saurabh Bagaria, learned
Counsel assisted by Mr. Rites Goel, learned Advocate for the
respondent/assessee.
The moot question involved in these appeals is whether
the respondent has fulfilled his obligation under Rule 6(2) of
the Cenvat Credit Rules, 2004 by taking only 85% of the credit
on the common input service. The revenue had issued show cause
notice alleging that the assessee has cleared final products
manufactured by them without payment of duty but failed to pay
an amount equivalent to 10% of the price of final products
which were manufactured by them. It was alleged that the
respondent/assessee did not maintain separate accounts for
receipt, consumption and inventory of input and input services
meant for use in the manufacture of dutiable and exempted goods
or services and proportionate Cenvat Credit on such inputs has
not been expunged for the period from March, 2007 to December,
2007 and the subject goods were cleared at the NIL rate of duty
but exemption notification under which goods have been removed
were not mentioned in the ER 1 returns submitted by the
assessee.
There was an earlier round of litigation which
travelled upto to the Tribunal and the Tribunal by order dated
20th March, 2012 set aside the order of the Commissioner and
remanded the matter for de novo consideration. Pursuant to
which the Commissioner took up the case for de novo
consideration and by order dated 15th December, 2016 (the dates
of the orders passed by the Commissioner in the other appeals
are different. However, since we have taken up CEXA/22/2022 as
lead case, the dates which are relevant to the said case are
taken into consideration) dropped the proceedings holding that
the assessee has fulfilled the obligation under Rule 6 of the
Cenvat Credit Rules, 2004 inasmuch as they have not taken
credit of duty in respect of such portion of the input/input
services which were subsequently used by them for manufacture
of exempted goods and, therefore, the alleged contravention of
the provisions of the Cenvat Credit Rules, 2004 did not occur.
Therefore, the question of recovery of Cenvat Credit
attributable to the exempted finished goods does not arise.
The Commissioner held that there is no evasion of duty on the
part of the assessee, hence penalty and interest as proposed in
the show cause notice is not liable to be imposed and,
therefore, the proceedings initiated pursuant to the show cause
notices are to be dropped and, accordingly, the same were
directed to be dropped. The revenue was on appeal against such
order before the Tribunal. The Tribunal framed the following
questions for consideration while examining the appeals:
(a) Are the SCNs demanding an amount of 10% of the
value of exempted goods under Rule 6(3) of the
CCR, which culminated in the impugned orders
legally sustainable?
(b) Was the Commissioner correct in examining the
three cases where the orders were in the remand
proceedings in terms of Rule 6(2) of the CCR or
has the Commissioner gone beyond the scope of the
remand?
(c) Has the respondent fulfilled its obligations
under Rule 6(2) of the CCR by taking only 85% of
the credit on the common input services?
(d) Is the demand under Rule 14 invoking extended
period of limitation in the SCN sustainable?
(e) Is a penalty imposable under Rule 15 of the CCR,
2004?
Though it may be true that the learned Tribunal has
made an elaborate exercise examining the effect of Rule 6 of
the Cenval Credit Rules, post and pre-amendment, in our view
such an exercise may not be required in these appeals if we
consider question no.(c) as framed by the Tribunal as the first
issue and if the issue is decided against the revenue, then the
other issues need not be gone into. Thus, the first question
would be whether the assessee had fulfilled its obligation
under Rule 6(2) of the Rules by taking only 85% of the credit
on the common input services. This being fully factual issue,
we refer to the order passed by the Tribunal. The Tribunal
after noting the provisions of the Rules, took note of the
circular issued by the Board in Circular No.868/6/2008-CX dated
9th May, 2008 which gives an opportunity to a manufacturer to
furnish a certificate from the cost accountant/chartered
accountant giving details of quantity of input used in the
manufacture of exempted goods value thereof and Cenvat Credit
taken on this inputs to be submitted at the end of the year.
It is not in dispute that the assessee had submitted a
chartered accountant's certificate dated 15th November, 2010.
The Commissioner while examining the said certificate found
that the certificate shows the financial year wise/month wise
percentage of cenvat credit paid both on input and input
services vis-à-vis the percentage of duty paid, clearance and
non-duty paid clearance covering the period from 2006-07 to
2009-10 which include the duty paid bonded and NRD dispatches.
Therefore, the Commissioner held that non-availing of Cenvat
credit upto 15% could be equated as availing of 100% credit on
all the common inputs and payment of duty upto 15% of the value
of the common inputs which could be attributable to having been
used for the manufacture of exempted products. Further, it was
held that payment of 15% duty was made within the due date.
Therefore, the question of payment of interest does not arise
and hence, it could be concluded that the assessee has complied
with the amended provisions of Rule 6 of the Cenvat Credit
Rules, 2004 brought about by the Finance Act, 2010. Further,
after taking note of the certificates, the Commissioner noted
that the percentage of credit not availed or forgone is always
more than or equal to the percentage of non-duty paid clearance
and in view of the said factual position, opined that there has
been sufficient compliance by the assessee as far as
maintenance of separate account or for that matter they have
followed Rule 6(2) of the said Rules. Furthermore, the
Commissioner had noted the submission made by the assessee that
for the period from April, 2006 to March, 2009 the same
approach was adopted and, therefore, a different view cannot be
taken for the period under consideration. The Tribunal, on its
part, has re-examined the factual position.
It is pointed by the learned standing counsel for the
revenue that the Tribunal has taken note of the decision in the
case of Tiara Advertising vs. Union of India reported in 2019
(30) GSTL 474 (Telangana) and an appeal has been filed against
the said decision before the Supreme Court. As pointed out by
us earlier, we have taken up for consideration question no.(c)
which had been framed by the Tribunal and the issue as to
whether the decision in Tiara Advertising (supra) has to be
examined or not will arise only if question no.(c) (supra) is
decided in favour of the revenue. Therefore, we revert back to
the factual position to examine the correctness of the order
passed by the learned Tribunal. The Tribunal examined Rule
6(2) of the Rules and noted compliances that are required to be
done by an assessee where common input or input services are
utilised. The Tribunal examined the Chartered Accountant's
certificate issued by the person who audited the accounts of
the assessee who has given the percentage of exempted goods
cleared by them and noted that they never exceeded 15% and they
have taken credit on the common input and input services only
to the extent of 85%. Thus, taking note of the evidence
produced by the assessee, the Tribunal held that the assessee
has more than fully met the requirement of Rule 6(2). Further,
they found fault with the revenue by pointing out that the
revenue has not placed any evidence to show that proportionate
amount of Cenvat credit was reversed/not taken by the assessee,
was calculated wrongly. Furthermore, the revenue has not
produced any alternative calculations to show how much could
have been reversed/not taken. Therefore, in the absence of any
other evidence, the Tribunal examined the Chartered
Accountant's certificate produced by the assessee and held that
the assessee had sufficiently met the requirements of
maintenance of separate accounts under Rule 6(2) and,
therefore, upheld the order passed by the Commissioner who had
dropped all the demands raised against the assessee. It is
pointed out by the learned counsel for the revenue that after
the order passed by the Tribunal, the Department has issued
certain letters, the first of which is dated 29th April, 2022
and the assessee has also submitted reply and further
communication has been sent to the assessee. These
communications have been sent to the assessee for the period
covered in CEXA/22/2022 and CEXA/24/2022.
In our opinion, the Department having issued such
communication, it goes without saying that they have now
embarked upon an exercise to examine the contents of the
Chartered Accountant's certificate. This would indirectly mean
that the contest which was made before the Tribunal with regard
to the Chartered Accountant's certificate does not any longer
survive and it is only the contents thereof, sufficiency or
insufficiency of the material contained in the certificate
which is now being pursued by the Department. Therefore,
technically we would not be wrong in observing that the revenue
has accepted that portion of the order passed by the Tribunal
which answered question no.(c).
In the light of the above discussion, we are of the
considered view that the Tribunal rightly answered question
no.(c) in favour of the assessee.
In the light of the above conclusion, the other issue
as regards the effect of the judgement in Tiara Advertising
need not be gone into in these appeals. Thus, the appeals
filed by the revenue are dismissed and the substantial
questions of law(a), (b) and (d) are answered against the
revenue and in favour of the assessee and substantial question
of law (e) is left open.
Consequently, the connected applications for stay
also stand closed.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
S.Das/As.
