IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.06.2011 CORAM THE HONOURABLE Mr. JUSTICE T.RAJA W.P.No.5536 of 2011 Bonfiglioli Transmissions Private Limited, Represented by its CEO Mr.M.Ganesh, Plot No.AC7-AC 11, Sidco Industrial Estate, Chennai - 600 044. ... Petitioner Vs. Commissioner of Central Excise, Chennai - IV Commissioner, MHU Complex, 692, Anna Salai, Nandanam, Chennai - 600 035. ... Respondent PRAYER: Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of certiorari to call for the records on the file of the respondent in order in original no.38/2010-11, dated 27.01.2011 and quash the same. For Petitioner :Mr.Joseph Prabakar For Respondent :Mr.P.Mahadevan ORDER The petitioner-M/s.Bonfiglioli Transmissions Private Limited, Chennai, is a holder of Central Excise Registration Certificate bearing No.AAPCB1675NXM001 and is engaged in the manufacture of Gear Box Assembly and Gear Motor Assembly falling under Chapter Heading No.8483 and 8501 of Central Excise Tariff Act, 1985 respectively. Further, it is stated that the Gear Box Assembly and Gear Motor Assembly manufactured by the petitioner's company would suffer payment of Excise Duty and the Government had also granted exemption from payment of Excise Duty, inter alia, for components and parts of Wind Operated Electricity Generator under notification No.6/2006-CE, dated 01.03.2006. Whileso, the petitioner's company had imported certain materials, like, Gaskets, Level Plug, Oil Seal, to use the same for manufacturing process of Gear Box Assembly and Gear Motor Assembly, by availing Cenvat Credit of the Additional Duty of Customs (CVD) paid on the raw materials and components under the Cenvat Credit Rules, 2004 https://hcservices.ecourts.gov.in/hcservices/ (hereinafter referred to as "CCR, 2004). While clearing the payment of duty to certain customers in selling the Gear Box Assembly and Gear Motor Assembly, whenever the said materials are sold to Wind Mill Customers, the petitioner had availed the exemption provided under Notification No.6/2006-CE, dated 01.03.2006. However, if inputs are used in manufacture of both dutiable final products as well as exempt products, Rule 6 of CCR, 2004, provides that separate records should be maintained for Cenvat Credit relatable to dutiable final products, failure of maintaining separate records as per Rule 6(3) of CCR, 2004, Cenvat Credit on those common inputs would be allowed only if the manufacture pays an amount equal to 10%, now it is reduced to 5% on the value of exempt products. 2. Under this background, it was submitted that whenever Gear Box Assembly and Gear Motor Assembly are cleared for Wind Mill companies, then an amount equal to 10% should be paid, since the petitioner did not maintain separate records for availing Cenvat on inputs relatable to manufacture of dutiable final products. When the matter stands thus, the Government had amended Rule 6 of CCR, 2004, with effect from 01.04.2008, by bringing the concept of proportionate reversal into CCR, 2004, for the first time. By doing so, the Government had also provided three alternatives, which are extracted as under:- a) Maintain separate records for inputs required for manufacture of Excisable Products. b) Do not maintain separate records, but pay an amount of 10% (now 5%) on the value of exempt products. c) Compute the actual amount of Cenvat Credit relating to the exempt product and reverse that amount of credit which is proportionate to the value of exempt product as per the formula given in Rule 6 of CCR, 2004. 3. The petitioner, by following the ratio laid down by the Supreme Court in Chandrapur Magnet Wires (P) Ltd. Vs. Commissioner (1996 (81) ELT 3 (SC)), said to have reversed the proportionate amount of Cenvat Credit attributable to the exempted goods for the period from February, 2008 to December, 2008, which works out to Rs.97,85,380/-. But, the respondent opposed the said method on the premise that the petitioner had not maintained separate records for dutiable and exempt products and therefore, the petitioner should pay an amount of 10% on the value of Gear Box Assembly and Gear Motor Assembly. On that basis, when show cause notice No.24/2009, dated 05.03.2009, was issued to the petitioner for the period from February 2008 to December 2008, mentioning specifically that the petitioner failed to maintain separate records, therefore, he should pay an amount equal to 10% of the value of Gear Box Assembly and Gear Motor Assembly supplied to Wind Mill Customers as per Rule 6 of CCR, 2004, on receipt of the said show cause notice, the petitioner has filed a https://hcservices.ecourts.gov.in/hcservices/ detailed reply stating that they have reversed the proportionate credit and hence, there is no requirement of reversal of 10% of the value of exempt goods again. Thereafter, the matter was adjudicated upon and finally, the respondent passed an order in Original No.6/2009, dated 16.12.2009, confirming the demand of differential Excise Duty of Rs.1,00,28,716/- and levying penalty of Rs.5,00,000/-. 4. Aggrieved by the said order, when the petitioner preferred a writ petition before this Court, the said writ petition was dismissed and as against that, the petitioner preferred a writ appeal unsuccessfully. The Division Bench of this Court, by dismissing the writ appeal, directed the petitioner to file a statutory appeal within two weeks. Accordingly, the petitioner filed an appeal before the Tribunal and the Tribunal, by final order No.1165/2010, dated 08.11.2010, had remanded the matter back to the respondent with a direction to consider the matter afresh in the light of the amendment made in Rule 6 of CCR, 2004. Thereafter, the respondent after granting a personal hearing to the petitioner, passed the present impugned order confirming the entire demand of differential Excise Duty of Rs.1,00,28,716/- and the penalty of Rs.5,00,000/-. 5. Learned counsel appearing for the petitioner challenging the correctness of the impugned order contended that the impugned order is ex-facie illegal for the reason that the period in dispute being February, 2008 to December, 2008, the respondent had adjudicated the matter only for the period February, 2008 and March, 2008 and confirmed the demand as per the show cause notice and further held that the portion of the order pertaining to the period from April, 2008 to December, 2008, need not be altered or tinkered with. His further case is that when the Tribunal, vide final order No.1165/2010, dated 08.11.2010, set aside the demand for the entire period in dispute, namely, February 2008 to December, 2008, and on remand, without giving an opportunity to the petitioner, the respondent proceeded to confirm the payment for the period from April, 2008 to December, 2008. Since the impugned order is directly against the order passed by the Tribunal order dated 08.11.2010, he prayed for setting aside the impugned order passed by the respondent. 6. Per contra, learned counsel appearing for the respondent submitted that the petitioner's company had contravened Rule 6(3)(i) of CCR, 2004, in as much as they had not discharged the amount @ 10% of the value of the exempted final products at the time of clearance of exempted final products on which cenvat credit was availed by them. Secondly, it was contended that the writ petition has been wrongly filed before this Court, despite an alternative remedy available to them in the form of appeal before the CESTAT, Chennai, under Section 35 B of the Central Excise Act, 1944 and on that basis, https://hcservices.ecourts.gov.in/hcservices/ he prayed for dismissal of the present writ petition. 7. Heard the learned counsel appearing on either side and perused the materials available on record. 8. The petitioner's Company are engaged in the manufacture of Gear Box Assembly and Gear Motor Assembly falling under the Chapter Heading No.8483 9000 and 8501 3210 of Central Excise Tariff Act, 1985, respectively. They are also availing Cenvat credit of the Central Excise Duties paid on inputs, capital goods and Service Tax paid on input services under CCR, 2004. When they are clearing their finished goods on payment of duty to certain customers, they are also clearing the Gear Box Assembly without payment of duty for use in the Wind Mill Generators by availing the exemption available under notification No.6/2002-EC, dated 01.03.2002. But, they do not maintain separate accounts of raw materials. If any person, who is availing Cenvat Credit for the inputs and clearing part of their finished goods on payment of duty and part of the finished goods without payment of duty, has to follow the provisions of Rule 6 of CCR, 2004, i.e, either the manufacturer should not avail Cenvat Credit for the inputs used in the manufacture of goods cleared without payment of duty or pay 10% of the value of such exempted clearances as provided under sub-rule (3) of Rule 6 of CCR. Therefore, as per the provisions of Rule 6(3)(b) of CCR, 2004, since the petitioner has failed to maintain separate records, he should have paid an amount equal to 10% to the exempted goods at the time of clearance of the goods. Further, as per the notification No.10/2008-CE (NT), dated 01.03.2008, the manufacturer has an option to pay 10% of the value of the exempted goods or pay the amount equivalent to the Cenvat Credit. 9. Be that as it may, when this controversy was under challenge before this Court, this Court, by dismissing the writ petition on the earlier occasion, directed the petitioner to approach the Appellate Authority. Aggrieved by the said direction, the petitioner has preferred an writ appeal and even in the writ appeal, the Division Bench of this Court, by dismissing the writ appeal, directed the petitioner to approach the Tribunal and thereafter, when the petitioner approached the Tribunal, the Tribunal remanded the matter back to the respondent for fresh adjudication. On remand, the respondent has reconfirmed the earlier order, which is impugned in the present writ petition. Therefore, the short issue raised in the present writ petition is when the Tribunal, by setting aside the demand for the entire period in dispute, namely, from February, 2008 to December, 2008, remanded the matter back to the respondent, the respondent, without giving an opportunity to the petitioner, proceeded to confirm the demand for the period from April, 2008 to December, https://hcservices.ecourts.gov.in/hcservices/ 2008. Learned counsel for the petitioner pleaded before this Court that when there was a direction given by the Tribunal to adjudicate the matter afresh, the respondent took a stand that the demand for the period from April, 2008 to December, 2008, which is subject matter of the show cause notice No.24/2009, dated 05.03.2009, need not be adjudicated, is clear violation of the order passed by the Tribunal. If this is the grievance, the petitioner should have approached the Tribunal, as he has got statutory right of appeal under Section 35 B of the Central Excise Act, 1944. Having got an alternative effective appeal remedy under Section 35 B of the Act, though this Court for a moment accepts this issue as a reasonable one, but in view of the existence of efficient alternate remedy provided under Section 35 B of the Act, directs the petitioner to approach the Tribunal within a period of two weeks from the date of receipt of a copy of this order. 10. Further, it is to be noted that this Court, while entertaining the writ petition, has granted interim order of stay and the same is also continued till now. Therefore, the interim order of stay shall be extended for a period of two more weeks to enable the petitioner to avail his appeal remedy before the Tribunal against the impugned order passed by the respondent. In view of the pendency of the matter, if the petitioner moves proper application to condone the delay, the same shall be considered without closing the matter on delay aspect, as the petitioner has got debatable issue to be decided by the Tribunal on merits. 11. With the above direction, the present writ petition is disposed of. No Costs. M.P.No.1 of 2011 is closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar rkm https://hcservices.ecourts.gov.in/hcservices/ To Commissioner of Central Excise, Chennai - IV Commissioner, MHU Complex, 692, Anna Salai, Nandanam, Chennai - 600 035. +1cc to Mr.P.Mahaadevan, Advocate Sr 35966 KJI(CO) km/30.6. W.P.No.5536/2011 https://hcservices.ecourts.gov.in/hcservices/