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2016 (12) TMI 841 - AT - Central Excise


Issues:
1. Reversal of cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004.
2. Justification for demanding 10%/5% of the value of electricity under Rule 6(3).
3. Compliance with the conditions specified in Rule 6(3)(i)(ii) and (iii) of the Cenvat Credit Rules, 2004.
4. Consideration of the reversal of cenvat credit already made by the appellant.
5. Verification of whether the amount of cenvat credit already reversed satisfies the requirement of proportionate reversal.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI concerns the dispute over the reversal of cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004, involving the appellant engaged in the manufacture of sponge iron. The appellant availed cenvat credit for common inputs and input services used in the production of electricity within their factory premises, which was also partly sold outside. The department demanded the reversal of an amount equal to 10%/5% of the value of exempted goods, namely electricity, leading to a confirmed demand of ?1,47,81,450 along with interest and penalty.

The appellant challenged this demand, arguing that they had already reversed a proportionate share of the credit availed on inputs and input services used in generating electricity sold outside. The Tribunal acknowledged that while the credit for inputs used in captive electricity generation was justified, the credit attributable to electricity sold outside required reversal as per Rule 6(3) of the Cenvat Credit Rules. The appellant claimed to have already reversed a portion of the credit but had not followed the detailed procedure specified under Rule 6(3)(i)(ii) and (iii).

The Tribunal referred to the Supreme Court's decision in Chandrapur Magnet Works (P) Ltd. vs. CCE, Nagpur, stating that once cenvat credit is reversed, it is considered as not availed. Despite the appellant's failure to strictly adhere to the procedural requirements, the Tribunal recognized the benefit of proportionate reversal and remanded the matter to the original adjudicating authority to verify if the amount already reversed satisfied the proportionate reversal requirement. The Tribunal directed the authority to reexamine the issue and pass an order expeditiously, emphasizing that there was no justification for demanding the full amount calculated under Rule 6(3). The appeal was disposed of by way of remand, providing the appellant with an opportunity to present their case before the original adjudicating authority.

 

 

 

 

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