2014 (2) TMI 448 - HC - 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 - Appellant was manufacturing dutiable as well as exempted goods and while availing of Cenvat credit, the Appellant had not maintained a separate account as required by Rule 6(2) and suppressed this fact. On this ground, the extended period of limitation was invoked and the Appellant was held liable to pay an amount equal to 10% of the total price of the exempted final product as required by Rule 6(3)(b). Material before the Tribunal was sufficient to indicate that admittedly the Appellant produced dutiable and exempted products. Though it failed to maintain a separate account in respect of the input service utilised in or in relation to the dutiable and exempted final products as required by Rule 6(2), this fact was suppressed from the Department with the intent to evade duty - Appellant had failed to avail of the facility which was available under the amended provisions of the Finance Act, 2010. The Tribunal while deleting the penalty has made a passing observation to the effect that there was no intention to evade payment of duty. This, however, does not in any way nullify or negate the principal finding of the adjudicating authority and the first Appellate Authority which has been confirmed by the Tribunal - Decided against assessee.

Summary

Issues:
1. Appellant's liability for maintaining separate accounts for dutiable and exempted goods under Rule 6(2) of Cenvat Credit Rules, 2004.
2. Validity of invoking the extended period of limitation under the proviso to Section 11A.
3. Imposition and deletion of penalty under Rule 15(3) of Cenvat Credit Rules, 2004.
4. Appellant's failure to avail of the procedure for rectifying wrongly availed credit under the Finance Act, 2010.

Analysis:

Issue 1: The Appellant was required to maintain separate accounts for dutiable and exempted goods under Rule 6(2) of the Cenvat Credit Rules, 2004. Failure to do so led to the invocation of the extended period of limitation due to willful suppression of facts regarding separate accounts, resulting in a demand equivalent to 10% of the total price of exempted goods under Rule 6(3)(b). The Tribunal confirmed the order of adjudication, emphasizing the Appellant's failure to maintain separate accounts despite producing both types of goods.

Issue 2: The Appellant contested the validity of invoking the extended period of limitation under the proviso to Section 11A, arguing that there was no intention to evade payment of duty. The Tribunal noted this argument but upheld the invocation based on the Appellant's failure to comply with the separate accounting requirement, leading to the demand for payment of 10% of the total price of exempted goods.

Issue 3: The penalty imposed on the Appellant under Rule 15(3) of the Cenvat Credit Rules, 2004 was deleted by the Tribunal. The Appellant argued that the penalty was unjustified due to the absence of intent to evade duty. The Revenue did not appeal the deletion of the penalty, citing the quantum involved. However, the Tribunal upheld the invocation of the extended period of limitation for the first show cause notice, emphasizing the Appellant's non-compliance with accounting rules.

Issue 4: The Appellant failed to rectify the wrongly availed credit under the Finance Act, 2010, which allowed for rectification within a specified time frame. The Tribunal highlighted the Appellant's failure to utilize this provision, leading to a confirmation of the demand for payment of 10% of the total price of exempted goods. Despite the Tribunal's observation of no intent to evade duty, the primary findings regarding non-compliance with accounting rules were upheld.

In conclusion, the Appeal was dismissed as it did not raise any substantial question of law. The Tribunal's decision was based on the Appellant's failure to maintain separate accounts, leading to the demand for payment of 10% of the total price of exempted goods and the valid invocation of the extended period of limitation.