2015 (2) TMI 1215 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(3) of Cenvat Credit Rules, 2004 - whether the accounts should have been maintained and segregation should have been done at the time of receipt itself? - Held that - even subsequent reversal of credit would be sufficient and in this case before the raw materials/inputs were issued for manufacture of exempted goods, credit has been reversed - when the inputs were taken out for manufacture of exempted goods, they ceased to be cenvated inputs and since separate accounts for the inputs were maintained at this stage, it can be considered as fulfilment of obligation - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Failure to maintain separate accounts for common inputs used in manufacturing exempted and dutiable products.
2. Dispute over the interpretation of Rule 6(3) of Cenvat Credit Rules, 2004.
3. Whether maintaining separate BIN cards and reversing credit before issuing inputs for exempted products fulfills the legal requirements.

The judgment pertains to a case where proceedings were initiated against the appellant for not maintaining separate accounts for common inputs used in manufacturing exempted and dutiable products, as required by Rule 6(3) of Cenvat Credit Rules, 2004. The original authority demanded an amount of Rs. 53,51,198, which was later set aside by the Commissioner (Appeals), leading to the Revenue's appeal before the tribunal.

The tribunal noted that the appellant had maintained BIN cards and reversed credit before issuing inputs for exempted products. The authorized representative argued that this was insufficient to comply with the legal provisions. However, the tribunal found agreement with the Commissioner (Appeals) observations, emphasizing that the appellant had been maintaining separate BIN cards since October 2005 for inputs used in exempted goods, fulfilling the requirements of Rule 6(2) of Cenvat Credit Rules, 2004.

Addressing the argument that segregation should have occurred at the time of receipt, the tribunal held that subsequent reversal of credit was acceptable. They cited precedents supporting this view and concluded that once credit was reversed before issuing raw materials for exempted goods, the obligation to maintain separate accounts for such inputs was fulfilled. Therefore, maintaining separate accounts at the stage of issuing inputs for exempted goods was deemed sufficient compliance with the legal requirements.

In light of the above analysis, the tribunal found no merit in the Revenue's appeal and rejected it. The decision was pronounced and dictated in open court, upholding the Commissioner (Appeals) ruling in favor of the appellant.