Jindal Architecture Ltd. vs Union of India (UOI)

This writ petition is directed against the Order No. F-504/CE/07-SC(PB), dated 20-3-2007 passed by the Settlement Commission u/s 32F(7) of the Central Excise Act, 1944 (hereinafter referred to as "the said Act"). The petitioner manufactures claddings and railings as its final products. In respect of these final products, it uses stainless steel sheets and pipes as raw materials. The exact nature of the controversy is that the petitioner seeks adjustment of the CENVAT credit, which it had reversed on the said raw material, against the duty liability as settled by the Settlement Commission. The learned Counsel for the petitioner drew our attention to paragraph 9 of the Settlement Commission''s order which reads as under:

As regards the claim for Cenvat Credit benefit, the main applicant has claimed that they had reversed the credit for the period Jan., 2005 to Sep, 2005 and thereafter paid 10% of the sale price of their finished goods as per Rule 6(3)(b) of the Cenvat Credit Rules in the remaining three months. Under Rule 6(1) of the CENVAT Credit Rules 2004, the credit was not permissible on inputs, which were used in the manufacture of "exempted" goods. However, Sub-rule (2) of Rule 6 of CENVAT Credit Rules, 2004 prescribed a procedure under which the CENVAT credit of duty paid on inputs used in the manufacture of exempted goods could be availed in cases where duty paid inputs were used in the manufacture of both dutiable and exempted goods. It is not in dispute that the provisions of Sub-rule (2) of the said Rule 6 were not complied with by the main applicant. As the final products manufactured by the main applicant did not fall under the categories specified under clause (a) of Rule 6(3) of the aforesaid Rules, they were not permitted under the said Rule 6(3)(a) to avail of CENVAT benefit by paying an amount equivalent to the CENVAT credit attributable to inputs used in the manufacture of exempted final products at the time of their clearance from the factory. Their claim that for the last three months, they did not reverse the credit but paid an amount equal to 10% of the total sale-price of their final goods is also of no help because firstly their final goods were not "exempted" goods and secondly, the payment under Rule 6(3)(b) of the CENVAT Credit Rules, 2004 was of an "amount" which was neither duty nor "Cenvat Credit". No evidence or precise data has been produced proving the exact amount of duty paid on the inputs, which were used in the manufacture of the goods so cleared without discharging duty liability. It is observed that the final goods manufactured and cleared by the main applicant were not exempted from whole of the duty under any notification. They had been paying duty on the same final products up to 14-1-2005, where-after, they suddenly departed from the said established practice on their own and started removing the goods without payment of duty. Despite a written assurance in the statement dated 30-1-2006 of Shri Anoop Aggarwal, Senior Manager, Accounts, that no credit on such inputs would be taken, they reneged on it. In the totality of facts and circumstances, it is not possible to allow the main applicant''s prayer for reduction of Rs. 31,93,569/- in the duty amount towards CENVAT credit.

(underlining added)

Particular emphasis was laid by the learned Counsel on the observation of the Settlement Commission contained in the aforesaid paragraph to the following effect:

No evidence or precise data has been produced proving the exact amount of duty paid on the inputs, which were used in the manufacture of the goods so cleared without discharging duty liability.

As against this observation, the learned Counsel for the petitioner drew our attention to their letter dated 28-2-2007 addressed to the Settlement Commission, wherein they had made a specific request for adjustment of the amount of Rs. 31,93,569/-. Paragraph 3 of the said letter is relevant and the same reads as under:

In respect of the adjustment of the amount of Rs. 31,93,569/- the applicants have filed relevant information at pages 45-54 of the application. The invoice wise details of such payments made are enclosed herewith as Annexure-1 which will show that the amounts paid were either pro-rata reversal of credit on inputs or payment of 10% as the case may be. Such reversals were also shown in the monthly DR-1 returns. The applicants respectfully pray to the Hon''ble Settlement Commission to take into consideration the above payments and adjust the same against the admitted duty liability.

It is apparent from the above extract that the petitioner had filed information at pages 45-54 of the application. It is also clear that the invoice-wise details were placed before the Settlement Commission along with the said letter (as Annexure-1) which was filed subsequent to the hearing. However, in any event, insofar as the information which was available at pages 45-54 of the application is concerned, the same was required to be considered by the Settlement Commission. The observation of the Settlement Commission that no evidence or precise data had been produced proving the exact amount of duty paid on the inputs gives an impression as if the petitioner had not filed any information at all. This is not so as some evidence was produced in the said pages 45-54 of the application. It is for this reason that we feel that the Settlement Commission needs to reconsider this aspect of the matter.

The Settlement Commission is directed to examine this aspect of the matter only and pass an appropriate order. The re-examination by the Settlement Commission will be limited to this aspect of the matter based on the documents which were filed prior to the date of final hearing given by the commission. However, in case the Settlement Commission requires any information, it would be open to the Settlement Commission to call for the same from either party.

With these directions, the petition stands disposed of.