Rule 6(5) of the CENVAT Credit Rules, 2004, provides an overriding non-obstante scope for full input service credit. Furthermore, benefit of retrospective legislative amendments for proportionate credit reversal is available to an assessee even if formal application procedures were not strictly followed during the pendency of litigation.

Per: M.M. PARTHIBAN

This appeal has been filed by M/s Baxter (India) Private Limited, Aurangabad (herein after, referred to as “the appellants”, for short) assailing the Order-in-Original No. 67/CEX/COMMR/2017 dated 27.06.2017 (herein after, referred to as “the impugned order”) passed by the Commissioner, Customs, Central Excise & Service Tax, Aurangabad.

2.1 Brief facts of the case, leading to this appeal, are summarized herein below:

2.2. The appellants herein is engaged inter alia, in the manufacture of medicaments falling under Chapter 30 of the First Schedule to the Central Excise Tariff Act, 1985 at their factory at MIDC, Waluj. The appellants are registered taxpayers holding Central Excise Registration No. AAACB3906FXM001 for manufacture of aforesaid finished products and for compliance with the central excise statute. The finished products manufactured by the appellants include both dutiable goods viz., Ciprofloxacin Injection USP, Ciprofloxacin I.P 100 ML, Metronidazole 100 ML USP, Mannitol Injection 20% IP; and exempted goods viz., Amino drip and preparations of minerals and their supplements. The registered office/head office of the appellants situated at Gurgaon, is separately registered with the Service Tax Department as an Input Service Distributor (‘ISD’) and during the disputed period covering July, 2007 to June, 2009, they had distributed the CENVAT credit to the respective manufacturing units of the appellants, including the appellants’ unit situated at Waluj, Aurangabad.

3.1 Denial of CENVAT Credit of Service Tax paid on various input services is the subject matter of present dispute. In the course of EA-2000 audit conducted by the department on 25.10.2008 to 27.10.2008, upon scrutiny of details, documents on the basis of which CENVAT credit of service tax has been taken by the appellants during the disputed period, the department had objected to credit taken on certain services on the ground that the appellants had not maintained separate accounts for both dutiable & exempted final products in availing CENVAT credit as per Rule 6 of the CENVAT Credit Rules, 2004 (for short, referred to as “CCR, 2004”) and had availed CENVAT credit of input services for both dutiable and exempted goods without informing the same to the department. Thus, it was alleged that the appellants are liable for payment of Rs.10,41,35,815/-, being the amount equivalent to 10% on the value of exempted goods cleared during the disputed period. Therefore, the department issued Show Cause Notice (SCN) No.45/ ST/Commr/2010 dated 09.04.2010 against the appellants for recovery of irregular CENVAT credit taken during the period July, 2007 to June, 2009 by invoking extended period under the proviso to Section 11A(1) of the Central Excise Act, 1944 read with Rule 14 of CCR, 2004 and for imposition of penalty on the appellants under Section 11AC ibid and Rules 15(2) and 15(4) of CCR, 2004.

3.2 In adjudication of the aforesaid SCN dated 09.04.2010, the learned Commissioner vide impugned Order-in-Original dated 27.06.2017, had confirmed all the proposals made in the SCN. Feeling aggrieved with the impugned order in confirmation of the adjudged demands, the appellants have preferred this appeal before the Tribunal.

4.1 Learned Advocate appearing for the appellants had submitted that the appellants in manufacture of medicaments, wherever it is chargeable to duty, they avail CENVAT credit of duty paid on inputs used in the manufacture of such goods; they also avail credit of service tax paid on the input services received directly at the Waluj factory which is pertaining to dutiable goods. Wherever the finished goods manufactured by the appellants is exempted from payment of duty, they do not avail CENVAT credit of duty paid on inputs/input services used in the manufacture of such go