2010 (6) TMI 395 - AT - Central Excise

Cenvat credit of service tax Input service used in dutiable and exempted goods Demand of 10% of value of exempted cenvat credit in respect of common input services reversed before adjudication order As per section 73 of Finance Act, 2010 amending Cenvat Credit Rules, 2004 reversal of amount equal to credit on input services used in exempted goods is sufficient compliance if rules 6(4) Such retrospective amendment covers issue in favour of assessee Demand 10% set aside

Summary

Issues:
Waiver of pre-deposit of duty and penalty amounts under Rule 6(3)(b) of the Cenvat Credit Rules, 2004.

Analysis:
The appellant sought waiver of pre-deposit of duty and penalty amounts totaling Rs. 51,98,607/- each. The issue revolved around the payment of 10% of the value of exempted goods cleared from the factory premises. The appellant argued that they had reversed the appropriate Cenvat credit availed on disputed input services, complying with Rule 6 of the Cenvat Credit Rules, 2004. The amendment by the Finance Act, 2010, was deemed retrospective, impacting the case. The appellant highlighted the Eighth Schedule in the Finance Act, 2010, to support their argument.

The appellant had reversed the Cenvat credit on common input services used for both exempted and dutiable products before the adjudication order. The Tribunal agreed that the retrospective nature of the amendment to Rule 6 of the Cenvat Credit Rules, 2004, by the Finance Act, 2010, was applicable. The amendment allowed for the reversal of Cenvat credit attributable to inputs used in exempted goods, subject to payment of interest at 24% per annum. As the appellant had reversed the entire amount on input services, the demand for 10% of the value of exempted goods was set aside. The Tribunal also directed the appellant to pay any difference in interest calculated at 24% within four weeks.

Regarding interest, the retrospective amendment mandated the calculation of interest at 24% per annum, with the appellant required to pay any additional interest within four weeks. Since the demand for the value of exempted goods was set aside, no penalty was imposed on the appellant. The appeal was disposed of accordingly, and the stay petition was also resolved.