2011 (2) TMI 1165 - HC - Central Excise

Cenvat credit denied - No separate book of accounts maintained - SCN as 8% of the price of the exempted goods cleared has to be paid - Held that - As it is clear that even though the assessee initially took credit of the common inputs used in the manufacture of both dutiable and exempted goods they have reversed the credit availed on the inputs used in the manufacture of exempted final products - the assessee would not be covered by Rule 57AD of the Rules read with sub-rule (3) of Rule 6 of the CENVAT Credit Rules. There is no liability for payment of 8% of the price of the exempted final products as CENVAT credit availed has been reversed and they did not have the benefit of the said credit. Decided in favor of the assessee

Summary

Issues:
Challenge to Tribunal's order on payment requirement for exempted final products without separate accounts maintenance.

Analysis:
The case involved a dispute where the revenue challenged the Tribunal's order, contending that the assessee should pay 8% of the price on exempted final products even without maintaining separate accounts. The assessee, a manufacturer of Ayurvedic Medicaments and Cosmetics, availed CENVAT credit on common inputs used for both dutiable and exempted goods. The revenue argued that failure to maintain separate accounts necessitated payment under Rule 57AD and Rule 6 of the CENVAT Credit Rules.

Upon review, it was found that the assessee had indeed reversed the credit availed on inputs used for exempted final products, despite initially taking credit for common inputs. The Tribunal, considering various judgments, concluded that the assessee was not liable to pay 8% of the price of exempted final products as the CENVAT credit had been appropriately reversed, and they did not benefit from the credit.

The respondent's counsel highlighted that amendments required payment of 8% duty on inputs for exempted goods. They argued that since the assessee had reversed credit entries for goods used in manufacturing exempted products, the revenue's claim for full duty payment was unjustified. The Tribunal's decision was upheld, stating that the assessee was not covered by Rule 57AD and sub-rule (3) of Rule 6 of the CENVAT Credit Rules. Consequently, there was no obligation to pay 8% of the exempted final product price, given the reversal of CENVAT credit.

In the final judgment, the High Court found no fault with the Tribunal's decision and dismissed the appeal in favor of the assessee. The substantial legal questions were resolved in favor of the assessee, concluding that the revenue's appeal lacked merit.