2019-TIOL-3205-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL

REGIONAL BENCH, BANGALORE
COURT NO. I

Appeal No. E/20522/2019-SM

Arising out of Order-in-Appeal No. 58/2019, Dated: 05.03.2019

Passed by Commissioner of Central Tax , BANGALORE-I(Appeals)

E/20523/2019-SM

Arising out of Order-in-Appeal No. 57/2019, Dated: 05.03.2019

Passed by Commissioner of Central Tax , BANGALORE-I(Appeals)

Date of Hearing: 15.10.2019

Date of Decision: 15.10.2019

M/s MOLEX INDIA PVT LTD

PLOT NO 24/2 SY NO 35 DYAVASANDRA INDUSTRIAL AREA WHITEFIELD ROAD
MAHADEVAPURA POST BANGALORE - 560048 KARNATAKA

Vs

COMMISSIONER OF CENTRAL TAX

BENGALURU EAST BMTC BUILDING OLD AIRPORT ROAD
DOMLUR, BANGALORE - 560071 KARNATAKA

Appellant Rep by: Mr T R Venkateswaran, CA

Respondent Rep by: Mrs D S Sangeetha, Joint Commissioner (AR)

CORAM: S S Garg, Member (J)

CX- Appellant had not exercised their option under sub-rule (3)(iii) of Rule 6 of CCR, 2004, but the input services were utilized, both for
manufacturing and sale of dutiable goods and Trading which is an exempted service - The issue involved in the present case is short reversal
of cenvat credit in terms of rule 6(3)(iii) of Cenvat Credit Rules, 2004 - internal Audit had pointed out that the appellant while availing the
provisions of Rule 6(3A)(b)(iii) of CCR, 2004, has to take the total input service credit into account while calculating the credit to be reversed
and not the common input service credits alone.

Held: Issue has been settled by the Division Bench of this Tribunal in the case of Reliance Industries Ltd. - 2019-TIOL-1754-CESTAT-AHM
wherein it has been categorically held that total CENVAT credit for the purpose of formula given under Rule 6(3A) is only total CENVAT credit
of common input services–therefore, by following the ratio of the said decision, the impugned order is not sustainable in law – a s far as extended
period of limitation is concerned, it is found that there is no suppression of material fact on the part of the appellant with intention to evade
payment of duty and non-filing of intimation is only a procedural lapse and does not amount to suppression of fact for which benefit under rule
6(3)(ii) read with rule 6(3A) cannot be denied - in view of the above,both the appeals are allowed by following the ratio of the Division Bench of
this Tribunal in the case of Reliance Industries Ltd. and the impugned order is set aside – since the appeals are being allowed on merits, there
is no need to go into the question of limitation -consequently, both the appeals are allowed : CESTAT [para6.1, 6.2, 7]

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 Appeals allowed

Case laws cited:

MOLEX INDIA PVT LTD - 2019-TIOL-564-CESTAT-BANG... Para 2.1

Commissioner of Central Excise, Rajkot Vs Reliance Industries Ltd - 2019-TIOL-1754-CESTAT-AHM... Para 4

Vertiv Energy Pvt. Ltd. Vs CCE, Pune-I - 2019-TIOL-1003-CESTAT-MUM... Para 4

Merceds Benz India Pvt. Ltd. Vs CCE, Pune-I - 2015-TIOL-1550-CESTAT-MUM... Para 4

FINAL ORDER NOS. 20868-20869/2019

Per: S S Garg:

The appellants have filed these two appeals directed against the impugned orders both dated 05.03.2019 passed by the Commissioner
(Appeals) whereby the Commissioner (Appeals) has rejected one appeal totally and has partially allowed the other appeal by dropping the
demand pertaining to the extended period of limitation. Since both the appeals involve identical issue therefore both the appeals are taken up
together for discussion and disposal. The details of both the appeals are given herein below.

SI Appeal No. Period of Amount Involved Total Disputed OIA

No. dispute Amount before
Duty Penalty CESTAT

1. E/20522/2019 April 2011 to 5,41,656/- 1,10,000/- 6,51,656/- No.57/2019 dated

January 2015 March 05,2019

2. E/20523/2019 April 2012 to 6,91,688/- 6,91,688/- 13,83,376/- No.58/2019 dated

January 2015 March 05,2019

Total 12,33,344/- 801688/- 20,35,032/-

For the sake of convenience, the facts relating to Appeal No.E/20522/2019 are taken.

2. Briefly the facts of the present case are that the appellant is engaged in manufacture of electronic connectors, parts of connectors,
electronic connector harness and other IT products classifiable under Chapter 85 of the First Schedule to the Central Excise Tariff Act, 1985.
During the course of audit of the records of the appellant, it was noticed that the appellant is involved in trading activity also which is an
exempted service under Rule 2(e) of the CCR, 2004 and that they were utilizing common input services for both taxable/dutiable goods and
exempted services (trading) but they were not maintaining separate inventory of input services in terms of the provisions of Rule 6(2) of CCR,
2004. The appellant had not exercised their option under sub-rule (3)(iii) of Rule 6 of CCR, 2004, but the input services are utilized both for
manufacturing and sale of dutiable goods and Trading which is an exempted service. The internal Audit had pointed out that the appellant
while availing the provisions of Rule 6(3A)(b)(iii) of CCR, 2004, has to take the total input service credit into account while calculating the credit
to be reversed and not the common input service credits alone. But that the said assessee is taking only common service tax credit into
consideration for reversal of proportionate credit while calculating the proportionate CENVAT credit attributable to exempted services, for
reversal in order to comply with provisions of Rule 6(3A) of the CCR, 2004.

2.1. Taking due consideration of the above facts, SCN dated 15.12.2015 was issued proposing demand of Rs.6,91,688/- for the period April
2012 to January 2015 being the differential CENVAT credit short paid/reversed, alleging suppression of facts with intent to evade duty. After
due process of law, the Assistant Commissioner of Central Excise vide impugned OIO dated 31.01.2017 (issued on 20.02.2017) confirmed the
demand of Rs.6,91,688/- for the period April 2012 to January 2015 along with interest holding that the appellant had short paid/reversed
CENVAT Credit under Rule 14 of CCR, 2004 read with Rule 6(3A)(b)(iii) of CCR, 2004 and Section 11A of the Central Excise Act, 1944 and
Penalty of Rs.6,91,688/- imposed under Rule 15(2) of CCR, 2004 read with Section 11AC(1)(e) of the Central Excise Act, 1944. Aggrieved by
the order, the appellant filed an appeal to Commissioner (Appeals-I). The Commissioner (Appeals-I) along with 11 other appeals decided the
matter and remanded the same to the original authority. The appeals were decided by the then Commissioner (A) vide OIA No. 146 to
158/2018 dated 15.02.2018. Aggrieved by the above OIA, the appellant approached the CESTAT and filed
appeals vide No.E/20752/SM & E/20753/2018-SM respectively. The CESTAT, Bangalore vide Final Order No. 21612-21613/2018 dated
15.10.2018 = 2019-TIOL-564-CESTAT-BANG
remanded the matter back to the Commissioner (A) with a direction to dispose of the appeal on merits. After the remand, the Commissioner
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(A) in de novo proceedings passed the impugned order and has confirmed the short paid reversal of CENVAT credit amounting to
Rs.6,91,688/- along with applicable interest and penalty relating to Unit-II and confirmed the duty of Rs.5,41,656/- along with penalty of
Rs.1,10,000/- against Unit-I.

3. Heard both the parties and perused the records.

4. Learned Consultant appearing for the appellants submitted that the impugned orders passed by the Commissioner (Appeals) are not
sustainable in law as the same have been passed without properly appreciating the facts and the law. He further submitted that both the
authorities have wrongly interpreted the provisions of Rule 6(3) of CCR, 2004. He further submitted that as per Rule 6(3) of CCR, 2004 only
proportionate reversal of credit attributable only to common services is required whereas as per the impugned order total CENVAT credit
availed on all the services are to be considered for applying the formula given under Rule 6(3A). He further submitted that identical issue has
been considered by the Division Bench of the Tribunal in the case of
Commissioner of Central Excise, Rajkot Vs Reliance Industries Ltd. 2019-VIL-163-CESTAT-AHM-CE = 2019-TIOL-1754-CESTAT-AHM
wherein it has been categorically held that total CENVAT credit for the purpose of formula given under Rule 6(3A) is only total CENVAT credit
of common input services. He further submitted that if total CENVAT credit is considered for reversal of credit attributable to trading of goods
then it would lead to reversal of credit on various input services which have never been used towards trading of goods. He further referred to
amendment made in Rule 6(3A) by Notification No. 13/2016 dated 01.03.2016 wherein Rule 3A was amended. He further submitted that the
Government has substituted sub-rule 3A with intention to give clarification and the provisions of sub-rule 3A so as to make it applicable
retrospectively. He further argued that non-filing of intimation is only a procedural lapse and does not amount to suppression of fact for which
the benefit provided under Rule 6(3)(ii) read with Rule 6(3A) of CCR cannot be denied. In support of this submission, he relied upon the
decision in the case of Vertiv Energy Pvt. Ltd. Vs CCE, Pune-I - 2019-TIOL-1003-CESTAT-MUM
and Merceds Benz India Pvt. Ltd. Vs CCE, Pune-I - 2015-TIOL-1550-CESTAT-MUM
It is his further submission that the extended period of limitation has been wrongly invoked as the appellants have not suppressed material
fact from the Department and has been filing the Returns regularly and showing the taking of the credit. He further submitted that the Revenue
has not been able to bring any evidence on record to show that the appellants have suppressed the material fact with intent to evade the duty.
He also submitted that the demand would be considerably reduced if normal period is applied. It is his further submission that the normal
period in the present case should be one year from the relevant date whereas the Commissioner has taken 18 months as the normal period.
He has also given the calculations in his written submissions wherein he has stated that if the normal period of limitation is applied then the
demand will be reduced to Rs.1,55,755/- in case of Unit-I and Rs.34,307/- in case of Unit-II.

5. On the other hand, learned AR defended the impugned order and submitted that the appellant failed to give intimation to the Department
regarding the option exercised by him for reversing the proportionate CENVAT Credit and has suppressed the material fact from the
Department and extended period of limitation has rightly been invoked.

6. After considering the submissions of both the parties and perusal of the material on record, I find that the only issue involved in the present
case is short reversal of CENVAT credit in terms of Rule 6(3)(iii) of CCR, 2004. This issue has been considered by the Bench of the Tribunal
in the case of Reliance Industries Ltd. cited supra wherein the Tribunal after considering the provisions of Rule 6 in its entirety along with
subsequent amendment vide Notification No. 13/2016 dated 01.03.2016 has held in Para 8 & 10 as under:

"8. From the reading of Rule 6(1), it is clear that only in respect of input service used in exempted goods are not
allowed. That means input or input service used in taxable service/dutiable goods, Cenvat credit is allowed. Sub-rule
(2) of Rule 6 is only as an option that if any input or input services used in exempted goods, credit should not be
allowed and only with this intention some mechanisms for expunging Cenvat credit attributed only to the exempted
goods are provided. As per clause (b) (ii) & (iv), it is clearly provided that entire credit in respect of receipt and use of
inputs/input service is allowed when such input and input service is used in dutiable final products and taxable
service. However, nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be
allowed. The Revenue is only interpreting the term "total Cenvat credit" provided under the formula. If the whole Rule
6(1)(2)(3) is read harmoniously and conjointly, it is clear that "Total Cenvat Credit" for the purpose of formula under
Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/input
service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then
the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand
disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004.

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 10. From the above it can be seen that when anomaly was noticed, the Government has substituted the sub-rule (3A).
The legislators very consciously substituted the Rule with intention to give a clarificatory nature to the provision of
sub-rule (3A) so as to make it applicable retrospectively. It was all along not the intention of the Government to deny
Cenvat credit on the input/input service even though used in the dutiable goods. Keeping the said view in mind, the
substitution in sub Rule (3A) of Rule 6 was made. Therefore, the substituted provision of sub-Rule (3A) shall have
retrospective effect being clarificatory."

6.1. Since the issue has been settled by the Division Bench of this Tribunal cited supra therefore by following the ratio of the said decision, I
am of the considered view that the impugned order is not sustainable in law and therefore, the same is set aside by allowing the appeals on
merits. With regard to non-filing of intimation, the Tribunal in the case of Vertiv Energy Pvt. Ltd cited supra held in Para 5 as under

"5. Non-filing of intimation/declaration before the jurisdictional Central Excise officer regarding availment of option is
a procedural lapse inasmuch as the information required to be contained in the declaration was already available with
the department, which were furnished in the periodical ST-3 returns filed by the appellant-assessee. Thus, considering
the fact regarding availability of the information with the department, the Tribunal in the case of Merceds Benz India
Pvt. Ltd. Vs CCE – 2015 (40) STR 381 -2015-TIOL-1550-CESTAT-MUM
has held that non-filing of intimation is only a procedural lapse, for which the benefit provided under Rule 6(3)(ii) read
with Rule 6(3A) of the rules cannot be denied. In view of the settled position of law, I do not find any merits in the
appeal filed by the Revenue.

6.2. As far as extended period of limitation is concerned, I find that there is no suppression of material fact on the part of the appellant with
intention to evade payment of duty and non-filing of intimation is only a procedural lapse and does not amount to suppression of fact for which
benefit under Rule 6(3)(ii) read with Rule 6(3A) cannot be denied.

7. In view of my discussion above, I allow both the appeals of the appellant by following the ratio of the Division Bench of this Tribunal in the
case of Reliance Industries Ltd. cited supra and set aside the impugned order. Since, I am allowing the appeals on merits, there is no need to
go into the question of limitation. Consequently, both the appeals are allowed with consequential relief, if any.

(Operative portion of the Order was pronounced in Open Court on 15.10.2019)

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