2012 (2) TMI 438 - AT - Central Excise

CENVAT Credit - Non maintenance of separate accounts - Violation of provisions of Rule 6(3) of Cenvat Credit Rules - Held that - if the Commissioner finds that the credit reversed by the assessee is not correctly reversed the only option available to the Commissioner is to calculate it correctly and then ask them to reverse the correct amount. It goes without saying that before adopting the above manner of calculation he has to give reasons as to why he considers that the calculation given by the assessee is not proper and he has to disclose the method he is going to adopt to the assessee so that the assessee can make submissions as to why the calculation adopted by him may or may not be justified. After the retrospective amendment made by Section 73 of Finance Act 2010 there is no scope for demanding the assessee to pay 10%/5% of the value of the exempted product. Prima facie we are convinced that the assessee has complied with the provisions of the amended Rule 6 of Cenvat Credit Rules 2004. Retrospectively amended provisions are applicable for the impugned period also. If the calculations submitted by the appellant is not correct the Commissioner has to calculate the correct amount to be reversed explaining the method he proposes to adopt and giving an opportunity for hearing the appellant. Therefore we set aside the impugned order and remand the matter to the adjudicating authority to properly decide the quantum of input credit to be reversed by the appellants as per provisions of Rule 6 of Cenvat Credit Rules - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 6(3) of Cenvat Credit Rules regarding maintaining separate accounts for dutiable and exempted products.
2. Applicability of retrospective amendment in Rule 6 of Cenvat Credit Rules, 2004.
3. Invocation of extended period for demanding short paid amount.
4. Imposition of penalty based on the alleged non-maintenance of separate accounts.
5. Calculation and reversal of correct Cenvat credit amount.

Analysis:
1. The case involved a dispute regarding the interpretation of Rule 6(3) of the Cenvat Credit Rules concerning the maintenance of separate accounts for inputs used in the manufacture of dutiable and exempted products. The appellants argued that they maintained separate accounts for raw materials not utilized for Cenvat credit, challenging the demand for payment under Rule 6(3). The Revenue contended that the appellants did not maintain separate accounts for all inputs, just for Soda Ash, justifying the demand for 10%/5% of the value of exempted goods.

2. The appellants claimed eligibility for Cenvat credit they had not taken, emphasizing that they followed Rule 6(1) and were not liable for the demanded amount. They also raised the issue of the Commissioner not applying the retrospective amendment in Rule 6 for the relevant period, seeking relief from the penalty and extended recovery period.

3. The Tribunal noted that the Commissioner had not provided adequate reasons for denying the benefit of the retrospective amendment under Section 73 of the Finance Act, 2010 for the period in question. The Tribunal found that the appellants may have complied with the amended Rule 6 and directed a reassessment of the input credit to be reversed, setting aside the original order and remanding the matter for proper determination.

4. The Revenue's argument that the appellants did not maintain sufficient separate accounts for all inputs was countered by the appellants' claim of maintaining records for raw materials not utilized for credit. The Tribunal emphasized the need for proper calculation and disclosure of reasons by the Commissioner before demanding payment under Rule 6(3), especially after the retrospective amendment.

5. The Tribunal concluded that the appellants should be given an opportunity to present their case regarding the correct amount of input credit to be reversed, in line with the provisions of Rule 6 of the Cenvat Credit Rules. The order granted a waiver for pre-deposit of dues and remanded the matter for a proper determination, ensuring compliance with the amended rules and principles of natural justice.