ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIO No. 01/2004 dated 6-2-2004 passed by the Commissioner of Central Excise, Bangalore-III Commissionerate.
2. The appellants manufacture Steam Turbines and Gas Turbines. They avail exemption under Notification No. 6/2002-C.E., dated 1-3-2002 in respect of certain goods. Since they are availing Cenvat credit in respect of inputs, as per Rule 6 of Cenvat Credit Rules, 2002, they are required to reverse 8% of the sale price of the said goods. In the present case, in respect of supplies to 5 customers, the appellants actually reversed 8.64% of the price. They collected the amount reversed from the customers. Therefore, a Show Cause Notice was issued to them invoking Rule 6 of Cenvat Credit Rules, 2002 read with Board’s Circular No. 599/36/2001-CX., dated 12-11-2001. In para 3 of the Show Cause Notice, it is stated that 8% of the amount to be reversed shall be calculated on the total price received from the buyer including the amount reversed inasmuch as the amount so reversed has been collected from the buyer. This stand has been taken on account of the Board’s Circular mentioned supra. The amount to be reversed in accordance with the Board’s Circular works out to Rs. 59,24,356/-. We reproduce Annexure-A, indicating the calculation of amount to be reversed.
Annexure-A
Sl. No Name of the customer Invoice No. & Date Value Amount reversed as per Rule 6 of Cenvat Credit Rules but collected from the customer Total Price charged to the customer Amount of 8% to be reversed as per Rule 6 of Cenvat Credit Rules, 2002
Col No.
1 2 3 4 5 6 7
1. M/s. Indurxy Green Power Pvt. Ltd. 511/30-9-2002 20080000.00 1734912.00 21814912.00 1745192.96
2. M/s. Shriram Energy Systems Ltd. 513/30-9-2002 20800000.00 1797120.00 22597120.00 1807769.60
3. M/s. Shri Murli Mohana Boiled & Raw Rice Mill 742/30-11-2002 3605000.00 311472.00 3916472.00 313317.76
4. M/s. Perpetual Energy Systems Pvt. Ltd. 744/30-11-2002 20080000.00 1734912.00 21814912.00 1745192.96
5. M/s. Shri Lalitha Enterprises 797/24-12-2002 3600000.00 311040.00 3911040.00 312883.20
TOTAL 68165000.00 5889456.00 74054456.00 5924356.48
The Show Cause Notice proposes to demand the entire amount of Rs. 59,24,356/- under Rule 6 read with Rule 12 of Cenvat Credit Rules, 2002 read with Section 11A of Central Excise Act, 1944. Interest under Section 11AB has been demanded. Penalty under Rule 13 of Cenvat Credit Rules, 2002 was also proposed.
3. S/Shri G. Shiva Dass and Anil Kumar B., the learned Advocates appeared for the appellants and Shri R.K. Singla, the learned JCDR for the Revenue.
4. We have heard both the parties and have gone through the records of the case carefully. We find that the Show Cause Notice itself is highly defective in demanding an amount of Rs. 59,24,356/-. Revenue has conveniently forgotten that the appellant had actually reversed an amount of Rs. 58,89,456/-which is mentioned in column 5 of the above Annexure. The correct approach, assuming that the Board’s Circular clarifies the legal position, would be to demand only the differential duty of Rs. 34,900/- and not the entire amount. The Adjudicating Authority has also not applied her mind and demanded the entire amount. Thus, the Show Cause Notice as well as the Adjudication Order betray the non-application of mind. In our view, the appellant has reversed more than adequate amount as the Rule contemplates reversal of 8% of the sale price only. In the present case, it is stated in the Show Cause Notice that the appellant had reversed 8.64%. There is also no prohibition to collect this amount from the customer. So long as the appellant had complied with Rule 6 of the Cenvat Credit Rules, no demand can be made on them on the ground that they collected the amount from the customer. It is seen that the Show Cause Notice has not invoked Section 11D and has also not alleged the amount is collected as representing duty from the buyers. In these circumstances, we do not find any merit in the impugned order. The same is set aside by allowing the appeal.
(Pronounced in open Court on 10-7-2006)