2013 (4) TMI 221 - AT - Central Excise

Manufacturing of exempted as well as dutiable goods - Cenvat facility - Rule 6 - the appellant did not maintain separate accounts as required under Rule 6 (2) of the Cenvat Credit Rules, 2004 in respect of common inputs service used in the manufacture of exempted products as well as dutiable products. - Appellant made reliance on the case of Shree Rama Multi tech Ltd., Vs. UOI, reported in 2011 (2) TMI 575 - GUJARAT HIGH COURT wherein proportionate credit was allowed to be reversed instead of 10% of the price of exempted goods. Held that as per the provisions of Rule 6 (3) of the Cenvat Credit Rules, appellant were required to pay an amount equivalent to 10% of the value of the exempted goods cleared. Therefore, the confirmation of demand in their regard along with interest thereon cannot be faulted. In the decision of the Hon ble High Court of Gujarat in the case abovementioned the appellant therein had reversed the proportionate credit at the time of clearance of the goods, though the same was not provided for in Rule 57CC of the Cenvat Credit Rules at the relevant time. However, in view of the retrospective amendment by Section 69 of the Finance Act, 2010, they became entitled for such a facility. In that context, the Hon ble High Court held that the appellant be permitted to file an application for regularization of the credit taken but here the case is completely different. The appellant herein, has not reversed proportionate credit attributable to exempted goods at the time of clearance of the exempted goods nor have they sought to regularize the same even after the enactment of Finance Act, 2010 within the time period stipulated therein. The only relief that can be given to the appellant is with regard to the penalties imposed since there is no intention to evade any duty. - Penalty waived - demand confirmed.

Summary

Issues:
- Failure to maintain separate records for input services used in the manufacture of exempted and dutiable goods
- Demand for recovery of amount equivalent to 10% of the value of exempted goods
- Applicability of retrospective amendment to Cenvat Credit Rules, 2004
- Failure to reverse proportionate credit within the specified time limits
- Imposition of penalties

Issue 1: Failure to maintain separate records for input services used in the manufacture of exempted and dutiable goods

The appellant, a manufacturer of exempted and dutiable goods, did not maintain separate accounts for common inputs services used in the production of both types of products. This led to the issuance of show-cause notices for recovery of a specific amount under Rule 6 (3) of the Cenvat Credit Rules, 2004. The lower appellate authority confirmed the demand, prompting the appellant to appeal against the decision.

Issue 2: Demand for recovery of amount equivalent to 10% of the value of exempted goods

The appellant availed Cenvat credit for both dutiable and exempted goods without maintaining separate records. As a result, they were required to pay an amount equivalent to 10% of the value of the exempted goods cleared, as per Rule 6 (3) of the Cenvat Credit Rules. The confirmation of this demand, along with interest, was deemed appropriate based on the facts presented.

Issue 3: Applicability of retrospective amendment to Cenvat Credit Rules, 2004

The appellant cited a judgment of the Hon'ble High Court of Gujarat in a similar case where the appellant was allowed to reverse proportionate credit due to a retrospective amendment to the Cenvat Credit Rules. However, the appellant failed to take advantage of this provision within the specified time limits, leading to the rejection of their plea for reversal of proportionate credit.

Issue 4: Failure to reverse proportionate credit within the specified time limits

Despite the retrospective amendment to the Cenvat Credit Rules, the appellant did not apply for reversal of proportionate credit within the stipulated time frame. The failure to adhere to the prescribed procedure and time limits outlined in the Finance Act, 2010, resulted in the denial of the benefit granted in similar cases by the Hon'ble High Court of Gujarat.

Issue 5: Imposition of penalties

While the penalties imposed on the appellant were set aside due to the absence of any intention to evade duty, the order of the lower appellate authority confirming the demand for recovery of the amount equivalent to 10% of the value of exempted goods, along with interest, was upheld. The failure to comply with the statutory time limits for reversing proportionate credit led to the dismissal of the appeal, except for the modification regarding the penalties imposed.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the rationale behind the decision rendered by the appellate tribunal.