2016 (8) TMI 1244 - AT - Central Excise

Reversal of CENVAT credit - non-maintenance of separate records for taxable as well as taxable goods - Held that - the issue is now covered by the retrospective amendment to the relevant CENVAT Credit Rules as were in force during the relevant period by virtue of Sections 69 to 73 of Finance Act, 2010 and the assessee was allowed to reverse the proportionate credit on inputs attributable to exempted products - credit allowed - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Appeal against demand notice for recovery of CENVAT Credit on inputs used in manufacturing exempted goods without maintaining separate accounts.

Analysis:
The case involved an appeal against an order passed by the Commissioner, C.Ex. & S.Tax, Vapi, regarding the recovery of CENVAT Credit on inputs used in the manufacture of both dutiable and exempted goods without maintaining separate accounts. The appellant, engaged in the manufacture of Pharmaceutical Formulations falling under Chapter 30 of the Central Excise Tariff Act, 1985, had availed CENVAT Credit during the period June 2001 to December 2004 without segregating the inputs used in exempted goods. A demand notice was issued for recovery of 8%/10% of the value of exempted goods, amounting to ?5,84,773, with a proposal for penalty. The Adjudicating Authority confirmed the demand, leading to the appellant's appeal before the Commissioner (Appeals), who also rejected it.

The appellant claimed to have segregated the inputs used in exempted goods at the time of issuance for manufacturing both dutiable and exempted goods, and later reversed the proportionate credit on the inputs used in exempted products. The records indicated that the reversal of proportionate credit for inputs used in exempted final products was not disputed. The learned Authorized Representative for the Revenue acknowledged that the issue was covered by a retrospective amendment to the relevant CENVAT Credit Rules through Sections 69 to 73 of the Finance Act, 2010. This retrospective amendment allowed the assessee to reverse the proportionate credit on inputs used in exempted products.

Considering the retrospective amendment that permitted the reversal of proportionate credit on inputs used in exempted goods, the Tribunal found that the impugned order could not be sustained. Consequently, the order of the Commissioner (Appeals) was set aside, and the appeal was allowed with any consequential relief as per the law. The judgment was dictated and pronounced in an open court by Hon'ble Dr. D.M. Misra, Member (Judicial), Appellate Tribunal CESTAT AHMEDABAD.