Rule 6(3A) CENVAT reversal limited to common credit; excludes exclusive dutiable credit; no extended period or penalty for interpretational disputes.

Per Mr. VASA SESHAGIRI RAO:

M/s. Tamil Nadu Newsprint and Papers Ltd. (TNPL)., Kagithapuram (hereinafter referred to as “the appellant”) has filed two appeals before this Tribunal. The first appeal arises out of Order-in-Original No. 22/Commr/CE/2017 dated 30.10.2017 passed by the Commissioner of GST & Central Excise, Tiruchirappalli, covering the period from April 2009 to July 2014. The second appeal arises out of Order-in-Original No. 21/Commr/CE/2017 dated 30.10.2017, covering the period April 2009 to June 2017 in respect of electricity generated at windmills and sold, and April 2011 to June 2017 in respect of trading of notebooks. In both cases, the Show Cause Notices alleged short reversal of common CENVAT credit attributable to exempted goods/services under Rule 6(3A) of the CENVAT Credit Rules, 2004, read with Rule 14 and Section 11A of the Central Excise Act, 1944. Though the adjudicating authority did not confirm the demands as originally proposed and reworked the computation, demands were confirmed along with interest and penalties.

1.2 The appellant is engaged in the manufacture of printing and writing paper falling under Chapter 48 of the Central Excise Tariff. During the relevant period, certain clearances were exempt under applicable notifications; the appellant generated electricity in windmills and also undertook trading of notebooks, both treated as exempted activities for the purposes of Rule 6 of the CENVAT Credit Rules, 2004. The appellant availed CENVAT credit on inputs and input services used commonly and opted for proportionate reversal under Rule 6(3A). The department alleged that the appellant had incorrectly applied the formula by restricting it to common input services and by not properly including the value of electricity and traded goods, and contended that the appellant was liable either to pay 5%/6% of the value of exempted goods under Rule 6(3)(i) or to reverse a higher amount under Rule 6(3A).

2. Aggrieved by the confirmation of the demands, interest and penalties, the appellant has filed the present appeals. Since the facts and issues involved are common, both the appeals were heard together and are being disposed of by this common order.

3. The Ld. Advocate Shri M.N. Bharathi, appeared on behalf of the Appellant and advanced detailed submissions in support of the Appeal and the Ld. Authorized Representative Shri M. Selvakumar appeared for the Revenue and defended the Impugned Orders.

4. The Ld. Advocate Shri M.N. Bharathi, made the following submissions which are summarised as below: -

He has submitted that the issue is no longer res integra and stands covered by several decisions of this Tribunal including Lotte India Corporation Ltd., Dalmiya Cement (Bharat) Ltd., Honda Cars India Ltd., Toshiba JSW Power Systems Pvt. Ltd. and CCE v. Reliance Industries Ltd., among others etc., wherein it has been consistently held that for the purpose of Rule 6(3A), the term “total CENVAT credit” refers only to total common input service credit and not to credit exclusively used in manufacture of dutiable goods. It was argued that the department’s interpretation would lead to absurd results and disallow credit validly availed on inputs/input services exclusively used for dutiable goods, which is not contemplated under Rule 6. It was further contended that electricity generated in windmills located outside the factory and sold to TNEB is not “exempted goods” cleared from the factory so as to attract Rule 6(3). With regard to trading of note books, it was submitted that the appellant had already discharged liability under Rule 6(3A) and that the formula had been applied correctly by including value of exempted goods/services in denominato