2012 (10) TMI 648 - AT - Central Excise

Reversal of CENVAT credit - common inputs utilized for the manufacturing of dutiable as well as exempted goods - Held that - As assessee have already reversed the entire amount of demands raised in the appeal and undertaking to reverse demands raised in other appeal within thirty days on receipt of this order the issue requires no more deliberation as the retrospective amendment covers the issue wherein the respondents were required to pay the amount equivalent to cenvat credit availed by them on the inputs which are consumed for the manufacturing of exempted goods. Assessee herein is required to pay interest on the amount which has been reversed by them as per the retrospective amendment carried out by the provisions of Sections 82 and 83 of the Finance Act, 2005.

Summary

Issues Involved:
Reversal of cenvat credit on common inputs used for manufacturing dutiable and exempted goods; Appeal against the first appellate authority's decision based on limitation; Retrospective amendment of Rule 57CC of Central Excise Rules and Rule 6 of Cenvat Credit Rules; Interest liability on reversed amounts; Interpretation of law regarding penalty imposition.

Analysis:

Reversal of Cenvat Credit on Common Inputs:
The appeals before the Appellate Tribunal CESTAT, Ahmedabad involved the issue of reversal of cenvat credit taken on common inputs used for manufacturing both dutiable and exempted goods. The first appellate authority accepted the assessee's contention regarding the reversal of cenvat credit on inputs consumed in manufacturing exempted products. The Revenue appealed against this decision, primarily arguing that the first appellate authority's decision was based solely on limitation grounds and did not consider other aspects.

Retrospective Amendment of Rules:
The Tribunal noted that during the relevant period, Rule 57CC of Central Excise Rules and Rule 6 of Cenvat Credit Rules were retrospectively amended. The retrospective amendment required assessees to pay an amount equivalent to the cenvat credit availed on inputs used for manufacturing exempted goods. Additionally, interest was to be paid on the reversed amounts. The respondents had already reversed certain amounts demanded in appeals, and the Tribunal acknowledged this compliance with the retrospective amendment.

Interest Liability on Reversed Amounts:
Regarding interest liability, the Tribunal held that the respondent was liable to pay interest on the amounts reversed, as per the retrospective amendment brought about by Sections 82 and 83 of the Finance Act, 2005. Upholding the original adjudicating authority's decision, the Tribunal confirmed the interest liability on the amounts already reversed by the assessee.

Interpretation of Law and Penalty Imposition:
The Tribunal concluded that the respondent was required to reverse the cenvat credit availed on inputs used in exempted products and pay interest on such amounts. The lower authorities were tasked with calculating the interest liability. Since the issue primarily revolved around the interpretation of the law, the Tribunal decided that no penalty needed to be imposed on the respondent.

In summary, the appeals filed by the Revenue were disposed of by the Appellate Tribunal CESTAT, Ahmedabad, with a ruling in favor of the respondent on the grounds of compliance with the retrospective amendment regarding cenvat credit reversal and interest liability, without imposing any penalty due to the nature of the issue being an interpretation of the law.