2015 (9) TMI 1581 - AT - Service Tax

CENVAT credit - input services used for manufacture of taxable as well as exempt goods - non-maintenance of separate records - Held that - In view of subsequent compliance with the provisions of Rule 6(3)(ii) of CCR with the payment of credit required to be reversed along with interest there is substantial compliance of the law - The failure if any is only procedural lapse of not filing the declaration of availing option - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of duty under Rule 6 of Cenvat credit rules for not maintaining separate records of input services.
2. Reversal of credit and interest examined by the revenue.
3. Entitlement to provisions of sub-rule (3)(ii) of Rule 6 of Cenvat Credit Rules, 2004.

Analysis:
1. The judgment revolves around the demand of duty under Rule 6 of Cenvat credit rules due to the alleged failure of the appellants to maintain separate records for the use of input services, despite maintaining separate records for inputs. The Commissioner confirmed the demand, leading to the appeal by the appellants. The Asst Commissioner verified the reversal of credit and interest, noting compliance with the rules. However, it was argued that the appellants did not follow the conditions of Rule 6, leading to the demand. The Tribunal considered the procedural lapse of not filing the declaration and found substantial compliance with the law, ultimately setting aside the demand of duty and penalty, thus allowing the appeal.

2. The appellants had reversed the amount of credit required and interest on specific dates, which was examined by the revenue. The Asst Commissioner verified the reversal of Cenvat credit on input services and the payment of interest, finding them correct. The issue arose due to the appellants not maintaining separate books of account for input services used in manufacturing dutiable and exempted goods. Despite this, subsequent compliance with the provisions of Rule 6(3)(ii) of CCR, including the payment of credit required to be reversed along with interest, led to the Tribunal's decision to set aside the demand of duty and penalty.

3. The final issue pertains to the entitlement of the appellants to avail the provisions of sub-rule (3)(ii) of Rule 6 of Cenvat Credit Rules, 2004. The Asst Commissioner noted that the appellants did not follow the conditions of Rule 6, specifically in maintaining separate books of account for input services. However, the Tribunal found that the failure to file the declaration was a procedural lapse, and with subsequent compliance and payment, there was substantial compliance with the law. Consequently, the Tribunal set aside the demand of duty and penalty, allowing the appeal in favor of the appellants.