2010 (12) TMI 399 - HC - Central Excise

Reversal of credit - The Hon ble Tribunal is right in accepting reversal of credit taken by the assessee in this case instead of upholding the adjudicating authorities order to the assessee to pay an amount equal to 8% of total price of the exempted goods as per the Rules 6(3)(b) of Cenvat Credit Rules 2002 - As per the decision of the jurisdictional High Court in the case of M/s. Maize Products held that it is not possible to state that the Tribunal has committed any legal infirmity so as to warrant interference - Substantial question of law can be stated to arise out of the impugned order of the Tribunal - The appeal is dismissed.

Summary

Issues:
Challenge to order under Section 35G of the Central Excise Act, 1944 regarding reversal of credit taken by the assessee instead of paying 8% of total price of exempted goods as per Cenvat Credit Rules, 2002.

Analysis:
1. The appellant, Commissioner of Central Excise, challenged an order by the Tribunal questioning the acceptance of credit reversal by the assessee instead of paying 8% of total price of exempted goods as per Cenvat Credit Rules, 2002.
2. The respondent assessee, engaged in manufacturing medicines, availed modvat credit on raw materials used for dutiable and exempted products. Following an audit objection, the assessee reversed modvat credit of Rs. 23,22,633/- along with interest.
3. Two show-cause notices were issued demanding duty equal to 8% of total price of exempted goods. The adjudicating authority upheld the demand based on a circular despite favorable Tribunal and Supreme Court decisions. The Tribunal, however, allowed the appeal.
4. Arguments were presented by both parties with the Senior Standing Counsel emphasizing the obligation to maintain separate accounts or pay 8% duty under Cenvat Credit Rules, 2002.
5. The advocate for the respondent highlighted Tribunal decisions and a High Court case supporting the reversal of credit, citing compliance with relevant rules.
6. The Tribunal based its decision on Supreme Court and High Court precedents, emphasizing the manufacturer's obligation under Cenvat Credit Rules, 2002.
7. The High Court dismissed the appeal, finding the Tribunal's decision in line with legal requirements, and no substantial question of law arose for consideration.