2012 (4) TMI 513 - AT - Central Excise

Waiver of pre-deposit of duty - Availment of CENVAT Credit in respect of the common input services which were used in or in relation to manufacture of exempted and excisable goods - Assessee filed a declaration showing the reversal of credit along with interest attributable to the credit in respect of inputs used in the manufacture of the exempted goods - Rejection of said declaration - Held that - declaration filed by the applicant was rejected without affording an opportunity of hearing to the applicant. Further, we find that as per the provisions of Section 73 of Finance Act, 2010 in case the amount so paid is found to be less that the amount payable, the Commissioner has to call upon the assessee to pay the differential amount along with interest. From the order passed on the declaration, we find that the applicant has deposited an amount of ₹ 2,91,696/- whereas during the period in question, the applicant claimed credit of ₹ 20,97,979/- in respect of the common input services used in or in relation to manufacture of the goods. The verification report of the Dy. Commissioner of Central Excise show that the applicant requires to reverse the credit of ₹ 8,61,411/- attributable to the input services used in or in relation to manufacture of the exempted goods - rejection of the declaration filed under provisions of Section 73 of the Finance Act, 2010 is not sustainable - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Waiver of pre-deposit of duty under Rule 6(3)(b) of Cenvat Credit Rules based on retrospective amendment by Finance Act, 2010; Rejection of declaration under Section 73 of Finance Act, 2010; Correctness of amount paid and verification process by Commissioner of Central Excise; Reversal of credit attributable to input services used in manufacturing exempted goods; Opportunity of hearing to the applicant and sustainability of rejection of declaration.

Analysis:
The applicant sought waiver of pre-deposit of duty amounting to Rs. 2,09,84,411/-, interest, and penalty under Rule 6(3)(b) of Cenvat Credit Rules due to availing common input services for manufacturing excisable and exempted goods. The applicant claimed that retrospective amendment by Section 73 of the Finance Act, 2010 allowed for reversal of credit attributed to exempted goods, which was done by filing a declaration on 15-10-2010. However, the Commissioner of Central Excise rejected the declaration, leading to a show cause notice for the duty demand.

The rejection of the declaration under Section 73 of the Finance Act was contested by the applicant on grounds that the Commissioner should have verified the correctness of the amount paid and directed any differential amount to be paid within a specified period. The rejection without affording an opportunity of hearing was deemed unsustainable, especially considering the discrepancy in the amount deposited by the applicant and the credit claimed for input services used in manufacturing.

The Tribunal found merit in the applicant's contention that the rejection of the declaration was not sustainable. Upon verification by the Dy. Commissioner, it was determined that the applicant needed to reverse a credit of Rs. 8,61,411/-, whereas only Rs. 2,91,696/- was reversed. Consequently, the Tribunal directed the applicant to deposit the shortfall amount within four weeks, with the balance amount waived for pre-deposit and recovery stayed. The rejection of the application and the demand under Rule 6(3)(b) were set aside, remanding the matter for fresh adjudication by the Commissioner of Central Excise with a reasonable opportunity of hearing provided to the appellant.

In conclusion, the appeals were allowed by way of remand, emphasizing the importance of procedural fairness and correct application of the relevant legal provisions in matters of duty waiver and credit reversal under the Cenvat Credit Rules and the Finance Act, 2010.