2011 (1) TMI 533 - HC - Central Excise

Reversal of Cenvat credit - Rule 6(2) and 6(3) - The assessing officer in the course of assessment held that, assessee has reversed and amount of Rs. 72,699/- being the credit of duty paid on the inputs used for manufacture of DM water which is in contravention of the Cenvat credit Rules, 2004 - it is a clear case of ascertaining the liability of the assessee which falls within the term of determination of rate of duty payable by the assessee - The appeal is rejected as not maintainable with liberty to the appellant to approach the Apex Court under Section 35L of the Act

Summary

Issues:
1. Reversal of Cenvat credit for inputs used in manufacturing exempted products.
2. Assessment of duty paid on inputs for manufacturing DM water.
3. Maintaining separate accounts for dutiable and exempted final products.
4. Liability of the assessee for payment equivalent to Cenvat credit.
5. Jurisdiction of the High Court under Section 35G and 35L of the Act.

Analysis:

1. The appeal concerned the reversal of Cenvat credit for inputs used in manufacturing exempted products. The revenue contended that a proportionate reversal of credit sufficed to comply with Rule 6(2) and 6(3) of the Cenvat Credit Rules, 2004. The appellate authority upheld this position, overturning the assessing officer's decision to deny benefits to the assessee.

2. The assessing officer had determined that the assessee wrongly reversed an amount for duty paid on inputs used to manufacture DM water, contravening the Cenvat Credit Rules, 2004. Consequently, an order was issued demanding payment under Rule 14 of the Cenvat Credit Rules, 2004, read with Rule 5 and Section 11A of the Central Excise Act, 1944. However, both the 1st and 2nd appellate authorities reversed this order.

3. The issue of maintaining separate accounts for dutiable and exempted final products was raised. The assessee was using common inputs and input services for both types of products without segregating them. The question arose whether the assessee, in such circumstances, had the option to pay an amount equivalent to the Cenvat credit used in manufacturing final products like steam.

4. The judgment highlighted that the determination of liability fell under the purview of Section 35G and 35L of the Act. It was noted that such matters should be addressed in appeals before the Apex Court, as per the statutory provisions.

5. Consequently, the High Court declined to entertain the appeal, deeming it not maintainable within its jurisdiction. The appellant was granted liberty to approach the Apex Court under Section 35L of the Act for further redressal. The order rejected the appeal while allowing the appellant to seek remedy at the higher judicial forum.