2011 (1) TMI 850 - AT - Central Excise

Demand of interest - Inputs used in the manufacture and clearance of both exempted and dutiable final products without maintaining separate accounts - found to have been taken as credit of Service Tax paid on input services exclusively used in the manufacture of exempted products paid by the appellant - The appellant has submitted that the said amount remained as an entry in the cenvat account and the same was not utilized - Therefore, no liability to interest as ordered by the Adjudicating Authority arose in respect of the disputed credit - Find that this aspect is covered in favour of the assessee by the judgment of the Hon ble High Court of Punjab and Haryana in the case of Ind Swift Laboratories Ltd. Vs. UOI - 2009 -TMI - 34688 - PUNJAB & HARYANA HIGH COURT - However, the above relief would be admissible subject to verification of the claim of the appellants that the impugned amount remained as an entry in their cenvat account and was not utilized - Decided in favour of assessee.

Issues:
1. Availment of credit on common inputs used in the manufacture of both exempted and dutiable final products without maintaining separate accounts as per Cenvat Credit Rules, 2004.
2. Eligibility for cenvat credit on input services exclusively used for manufacturing exempted final products.
3. Demand of interest on the credit of Service Tax paid on input services exclusively used in the manufacture of exempted products.

Issue 1: Availment of credit on common inputs:
The appellant was found to have taken credit of duty paid on common inputs without maintaining separate accounts for exempted and dutiable final products as required by Rule 6 (3) (b) of Cenvat Credit Rules, 2004. The Commissioner held the appellant liable to pay Rs.9,51,75,451/- for exempted goods manufactured and cleared during the dispute period. Another dispute was regarding the eligibility of cenvat credit of Rs.1,64,34,699/- on input services used exclusively for exempted final products. The appellant accepted the irregularity and reversed the disputed credit. The impugned order demanded interest on the retained credit amount. The Tribunal referred to the Finance Act, 2010, which prescribes a procedure for granting admissible credit in such cases. The liability of the appellant would be discharged upon repayment or reversal of credit along with applicable interest as per the provisions of the Finance Act, 2010. The dispute was remanded to the Adjudicating Authority for regularization of payment.

Issue 2: Eligibility for cenvat credit on input services:
The challenge here was the demand for interest on the credit of Service Tax paid on input services exclusively used for manufacturing exempted products. The appellant argued that the amount remained in the cenvat account and was not utilized, hence no liability for interest arose. The Tribunal found merit in this submission, citing a judgment of the High Court in a similar case. The liability for interest on the disputed credit amount was remanded to the Adjudicating Authority for a fresh decision after verifying the claim that the amount remained unutilized in the cenvat account.

Conclusion:
The Tribunal found in favor of the appellant regarding the availment of credit on common inputs by referring to the provisions of the Finance Act, 2010. The liability would be discharged upon repayment or reversal of credit along with interest. As for the demand of interest on the credit of Service Tax paid on input services exclusively used for exempted products, the Tribunal remanded the decision to the Adjudicating Authority for further verification. The appeal and stay application were disposed of accordingly.

← Previous Next →