2016 (4) TMI 1224 - AT - Central Excise

Reversal of CENVAT credit - Rule 3(5) of CCR 2004 - freight involved on purchase of inputs subsequently removed as such - Held that - reliance placed in the case of Mercedes Benz India Private Ltd 2015 (8) TMI 24 - CESTAT MUMBAI , where it was held that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. - the appellant have rightly exercised option before the close of the financial year on 26/3/12 and paid the appropriate duty by way of debit in the Cenvat credit in terms of rule 6(3A) read with Rule 6(1)(ii). So far the question of interest is concerned, in clause (C) of sub Rule (3A) of Rule 6, it is provided that the manufacturer of goods shall determine finally the amount of Cenvat credit attributable to the exempt goods and exempt services for the whole financial year - clause E provides the manufacturer shall in addition to the amount short paid be liable to pay interest @ 24% per annum from the due date, that is, 30th of June, till the date of payment, where the amount short paid is not paid within the said due date. The appellant is entitled to the benefit of Rule 6(3)(ii) read with clause (3A) of the CCR 2004 - So far the penalty is concerned, the issue being wholly interpretational, it is held that there is no suppression of facts on the part of the appellant and accordingly, penalties imposed under all Sections, are deleted. Appeal allowed by way of remand for the verification of the amount to be reversed along with interest.

Summary

Issues Involved:
1. Reversal of Cenvat credit under Rule 6(3)(ii) of CCR, 2004.
2. Applicability of extended period of limitation.
3. Imposition of interest and penalties.

Detailed Analysis:

Issue 1: Reversal of Cenvat credit under Rule 6(3)(ii) of CCR, 2004
The appellant, M/s APL Apollo Tubes Ltd., is a manufacturer of Steel Tubes & Pipes and avails Cenvat credit for inputs and input services. An audit revealed that the appellant was also engaged in trading activities, which, following an amendment effective from 01/04/2011, was declared as an exempt service. The Revenue contended that the appellant needed to reverse/pay an amount calculated at 5% on the value of the traded goods under Rule 6(3)(i) of CCR, 2004. However, the appellant opted to pay an amount under sub-rule (3A) of Rule 6, which they communicated to the jurisdictional superintendent. The Tribunal referenced the Mercedes Benz India Pvt. Ltd. case, which clarified that the appellant has the liberty to choose any of the options provided under Rule 6(3) and that the Revenue cannot insist on a particular option. The appellant had complied with the conditions of Rule 6(3)(ii) by reversing the credit and paying the amount along with interest, thereby fulfilling their obligations under the rule.

Issue 2: Applicability of extended period of limitation
The appellant argued that the issue was interpretational and that there was no suppression of facts or malafide intention. The Tribunal agreed, noting that the activities were duly recorded in the books of accounts and that the information was obtained by the audit from these records. Consequently, the Tribunal held that the extended period of limitation was not applicable, making the demand for the period from April 2011 to September 2011 time-barred.

Issue 3: Imposition of interest and penalties
The Tribunal considered the appellant's compliance with Rule 6(3A) and noted that the appellant had sufficient unutilized Cenvat credit balance, which indicated that they had not utilized the credit in question. The Tribunal referenced the Simbhaoli Sugar Mills Ltd. case, which held that interest is compensatory and is not payable if the credit was reversed before utilization. The Tribunal also held that the penalties were not justified as the issue was interpretational and there was no suppression of facts. Consequently, the penalties imposed under various sections were deleted.

Conclusion:
The appeal was allowed by way of remand for the limited purpose of verifying the amount to be reversed along with interest. The adjudicating authority was directed to verify the amounts and provide the appellant an opportunity to rectify any discrepancies. The penalties were deleted due to the interpretational nature of the issue and the absence of suppression of facts.