2012 (7) TMI 781 - AT - Central Excise

Penalty - Cenvat credit on raw materials and services used for non-excisable goods Held that - Goods containing alcohol are not final product since the same are not excisable goods under the Central Excise Act - They submitted that since they were reversing 10% of the price of price of non-excisable goods - amount reversed under Rule 6(3)(b) of the Cenvat Credit Rules was Rs. 90,86,941/- which is much more than the amount paid by them on being pointed out by the Revenue - no finding has been given by the Commissioner on this aspect of their submission - matter remanded back to Commissioner Cenvat credit - services used for traded goods was admissible - trading activity undertaken by the appellants from their Head Office - Commissioner has stated that the method prescribed under Rule 6(3)(d)(iii) of the Cenvat Credit Rules, 2004 for apportioning common services between dutiable service and exempted services can be taken as a guideline on a rational basis - appellants had paid back the ineligible credit as per work-sheet prepared by them and they contended that the work-sheet was not rejected by the Commissioner Held that - Work-sheet submitted by the appellants has not been rejected by the Commissioner and it is open to the Commissioner to call upon the appellants to substantiate their computation of the work-sheet in respect of the credit availed and the appellants should be given an opportunity of being heard to explain their case in respect of the calculation as mentioned in the work-sheet - matter remanded back to the original authority - appeal is allowed by way of remand

Summary

Issues:
1. Admissibility of Cenvat credit on raw materials and services used for non-excisable goods.
2. Admissibility of Cenvat credit on services used for traded goods.

Analysis:

Issue 1:
The first issue pertains to the admissibility of Cenvat credit on raw materials and services used for non-excisable goods. The appellants, engaged in manufacturing cosmetic preparations, were importing and trading in certain products containing alcohol. The Department contended that goods containing alcohol are non-excisable and, therefore, the inputs used for such goods do not qualify as inputs for availing Cenvat credit. The Commissioner confirmed the demand for inadmissible credit and imposed penalties. The appellants argued that they were under a bona fide belief regarding the eligibility of credit and voluntarily paid back the credit upon being pointed out by the Department. The Tribunal remanded the matter back to the Commissioner to determine the intention of the appellants in availing ineligible credit before imposing penalties.

Issue 2:
The second issue revolves around the admissibility of Cenvat credit on services used for traded goods. The trading activity undertaken by the appellants was deemed ineligible for Cenvat credit as it did not qualify as output services or final products. The appellants voluntarily paid back the credit upon notification by the Department. The Commissioner used Rule 6(3)(d)(iii) for apportioning common services between dutiable and exempted services, which the appellants contested. The Tribunal found merit in the appellants' argument, noting that the work-sheet submitted by them was not rejected by the Commissioner. The matter was remanded back to the original authority for a fresh adjudication, providing the appellants with an opportunity to substantiate their computation of the work-sheet and explain their case regarding the calculation of credit availed on traded goods.

In conclusion, the appeal was allowed by way of remand for both issues, emphasizing the need for a thorough examination of the appellants' intentions in availing the credits and providing them with a fair opportunity to present their case with supporting documentation.