IPCA LABORATORIES LTD. Vs. C.C.E.
LAWS(CE)-2015-6-28
CUSTOMS EXCISE AND GOLD(CONTROL) APPELLATE TRIBUNAL
Decided on June 05,2015

Ipca Laboratories Ltd. Appellant
VERSUS
C.C.E. Respondents


Referred Judgements :-

SH. RAMA MULTITECH LTD. V. UOI [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NICHOLAS PIRAMAL INDIA LTD [REFERRED TO]


JUDGEMENT

RAKESH KUMAR, J. - (1.)
(2.)THE facts leading to filing of these appeals are in brief as under.
1.1 The appellant are manufacturers of pharmaceuticals products. The period of dispute in this case is from May, 2007 to March 2008. During this period, the appellant were using 6 common input services namely, man power recruitment service, telephone service, goods transport agency services, courier services, housekeeping cleaning services and technical testing and analysis service in or in relation to the manufacture of dutiable final product as well as exempted final products. However, they were not taking the cenvat credit in respect of these input services in proportion to the turnover of the exempted final product. During the period of dispute, they were foregoing the cenvat credit in respect of the 6 common input services mentioned above to the extent of 70%, based on the ratio of the turnover of dutiable and exempted final product during the previous financial year. During the previous financial year, out of the total turnover, only about 30% turnover was of the dutiable final product and the remaining 70% turnover was of the exempted final product. Accordingly, the appellant during the period of dispute took the credit of only Rs. 4,65,725/ - in respect of the 6 common input services mentioned above and had foregone the remaining cenvat credit. The Department was of the view that since separate account and inventory of the input services meant for dutiable final product and exempted final product had not been maintained as per the provisions of Rule 6(2) of Cenvat Credit Rules, 2004, the provisions of Rule 6(3)(b) would become applicable. It is on this basis that after issue of Show Cause Notice, the Commissioner vide Order -in -Original dated 19.01.2009 confirmed the demand of Rs. 5,75,52,022/ - against the appellant under Rule 6(3)(b) read with Rule 14 of the Cenvat Credit Rules, 2004 along with interest thereon under section 11AB and beside this imposed penalty of Rs. 2000/ - on them under Rule 15(3) of Cenvat Credit Rules, 2004. The Commissioner in this order held that in respect of clearances of the exempted final products, the appellant in accordance with the provisions of Rule 6(3)(b) of Cenvat Credit Rule, 2004 would be liable to pay an amount equal to 10% of the sale price of the goods. In course of proceedings before the Commissioner, the appellant pleaded that they have not taken cenvat credit in respect of 6 common input services, in question, in proportion to the turnover of the exempted final product during the previous financial year and accordingly out of total cenvat credit of Rs. 15,52,417/ - involved on the common input services mentioned above, they have foregone the credit of Rs. 10,86,692/ - and have only taken the credit of Rs. 4,65,725/ - in proportion to the use of the common services in or in relation to the manufacture of dutiable final product and hence, the provisions of Rule 6(2) have been complied with and accordingly, the provisions of Rule 6(3)(b) would not be applicable, but this plea was not accepted on the ground that the condition of maintaining separate account and inventory of the input services for use in exempted and dutiable final product has not been maintained. Against this order of the Commissioner, this appeal has been filed.

Heard both the sides.

(3.)SH . B L Narsimhan, Advocate, the Ld. Counsel for the appellant pleaded that w.e.f. 01.03.2008 Rule 6(3A) was amended and this amendment gave an additional option to the manufactures of dutiable and exempted final product, using common cenvat credit availed input/input services and this additional option was to reverse the proportionate cenvat credit in respect of inputs/inputs services used in or in relation to manufacture of exempted final product which was determined as per the provision of Rule 6(3A) that by Finance Act 2010, the provisions regarding reversal of proportionate credit was made retrospectively applicable, that since, the appellant have not taken the proportionate credit in respect of the input services used in or in relation to the manufacture of exempted final products, the option of paying 10% of the sale value of the final product cannot be forced upon them, that Hon'ble Gujarat High Court in case of Sh. Rama Multitech Ltd. v. UOI reported in : 2011 (267) ELT 153 Guj has held that in view of retrospective amendment to Rule 6(3) by Finance Act, 2010, even when the separate accounts of the input/input services meant for dutiable and exempted final product were not maintained, the manufacture is entitled to reverse proportionate credit, that in the present case, the Commissioner has not even disputed the quantum of credit foregone but has invoked the provisions of Rule 6(3)(b) and demanded an amount equal to 10% of the sale value of the exempted final product only on the ground that a separate account and inventory of the input services meant for dutiable final product has not been maintained, that this stand of the Department would not be correct in view of retrospective amendment to Rule 6(3) by Finance Act, 2010, which gives the manufacture an additional option of reversal of the proportionate cenvat credit attributable to the exempted final product, that when the appellant have already foregone the proportionate credit attributable to the exempted final product, the provisions of Rule 6(3) read with rule 6(2) stands complied with and hence, the amount equal to 10% of the sale value of the final product cannot be demanded from them. He, therefore, pleaded that the impugned order is not correct.
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