ELDER PHARMACEUTICALS LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) AFTER examining the records and hearing both sides, I note that the Appellants have been required to pay duty of Rs. 3,96,852/ - and equal amount of penalty for the period April 2006 to March 2007. The present application seeks waiver of pre -deposit and stay of recovery in respect of these amounts. During the material period, the Appellants were using common inputs and common input services in or in relation to the manufacture of dutiable final products and exempted final product, and, according to the department they were not maintaining separate accounts in relation to the common input services. On this basis, the lower appellate authority has demanded 10% of the value of the exempted final product cleared during the above period in terms of Rule 6(3)(b) of the CENVAT Credit Rules, 2004. The appellate authority found that the Assessee did not reverse the correct amount of CENVAT credit taken on the common input services. It calculated what is said to be the correct amount of CENVAT credit. In -as much as the party was found to have reversed short of what was actually required to be reversed on the common input services, the appellate authority has maintained that they are required to pay 10% of the value of the exempted final product as above. According to the learned Counsel, it was not possible for the Assessee to maintain separate accounts and, therefore, they did what was possible, i.e. they reversed CENVAT credit on pro rata basis. In the circumstances, the demand is unsustainable. As against this plea of the learned Counsel, the learned SDR points out that the Assessee has chosen to maintain separate accounts and reverse CENVAT credit on common input services correctly after the period of dispute, which means that maintenance of separate accounts was possible during the period of dispute as well. The learned Counsel, on this aspect, seeks to clarify that they have been following the procedure laid down under Rule 6(3A)(b) and (c) of the CENVAT Credit Rules, 2004 ever since these provisions came into force (2008). Prior to this, the counsel submits, it was impossible for the Assessee to maintain separate accounts and hence they could only reverse CENVAT credit on common input services on a pro rata basis. This pro rata calculation was done on the basis of the amount of production and the amounts of inputs and input services for the previous year. In this connection, the submission of the learned SDR is that it was very much open to the Assessee to follow the above procedure of provisional payment for every month followed by finalisation of the correct amount to be paid for such month. Instead, they chose to proceed on pro rata basis.

(2.) After giving careful consideration to the submissions, I note that the formula laid down under Rule 6(3A)(b)(iii) of the CENVAT Credit Rules, 2004 is one involving value of services and goods for the preceding financial year. In terms of this formula, a manufacturer of dutiable and exempted final products shall provisionally calculate the amount attributable to input services used in or in relation to the manufacture of exempted products and shall pay, in every month, an amount equivalent to such credit. This payment is provisional. When the actual figures for the financial year comprising the said month become available, the exact amount of CENVAT credit is calculated on the basis of actuals. If this amount is higher than the amount provisionally determined with reference to preceding financial year, the differential amount shall be paid. This procedure is in vogue from 2008. It appears, prior to 2008, there was no viable procedure or workable formula to enable manufacturers of dutiable and exempted final products to take correct amount of CENVAT credit on common input services. In this scenario, it is relevant to take note of a basic tenet of law, which is to the effect that no law shall require a person to do the impossible. Any provision of law, which requires a person to do the impossible, is no law in the eye of the prudent man. If the Appellant was not capable of maintaining separate accounts in relation to common input services, there was no workable option for them and, in that scenario, there is no point in saying that the Assessee had the option of paying 10% of the value of the exempted final product. In the instant case, it has not been shown on behalf of the Revenue that it was possible for the Assessee to maintain separate accounts in respect of common input services vis -a -vis dutiable final products and the exempted final product. Where the Revenue fails to discharge its burden, I have no option but to grant waiver and stay.

(3.) IN the result, there will be waiver of pre -deposit and stay of recovery in respect of the dues adjudged against the Appellants.