2014 (6) TMI 582 - AT - Central Excise

Waiver of pre-deposit - CENVAT Credit as distributed by input service distributor (ISD) - reversal of credit towards exempted products - Held that - there is no dispute as to the fact that appellant is availing Cenvat credit of the Service Tax paid on the input services distributed by their Head Office as Input Service Distributor. It is also undisputed that the appellant is utilising the ISD service tax credit for discharge of Central Excise duty on the goods manufactured and cleared by them. It is seen from the records that the appellant has claimed that they have reversed the amount which is attributable to the input services which go into manufacturing of exempted products, as per the provisions of Rule 6(3) of Cenvat Credit Rules, 2004. We also find from the certificate issued by the Chartered Accountant that it is so. At this juncture, though the appellant could have intimated the departmental authority regarding the option of reversal of input services which are attributable to the exempted goods but having reversed the same, we find that appellant has made out a prima facie case for the waiver of pre-deposit of amount which are confirmed against the main appellant on the ground that they are liable to pay 5% of the value of the exempted goods cleared from their factory premises - Stay granted.

Summary

Issues:
Waiver of pre-deposit of duty, Cenvat credit availed, Rule 6 of Cenvat Credit Rules, 2004, Separate books of account maintenance, Reversal of Cenvat credit, Input Service Distributor, Exempted and dutiable finished products, Applicability of Rule 6(3), Compliance with the law, Prima facie case for waiver, Recovery stay during appeal disposal.

Analysis:

The judgment revolves around two stay petitions seeking the waiver of pre-deposit of duty amounting to Rs. 1,26,87,564/- along with interest and penalties imposed on the appellant firm and its authorized signatory. The dispute arises from the appellant's availing of Cenvat credit on common inputs used in both exempted and dutiable finished products without maintaining separate books of account as required by Rule 6(3) of the Cenvat Credit Rules, 2004.

The appellant argues that they have already reversed a portion of the amount in compliance with Rule 6(3A) and presented a Chartered Accountant's certificate to support their claim. On the other hand, the Departmental representative contends that the reversal was done without prior intimation and includes incorrect calculations, incorporating services attributable to manufactured goods.

The appellant cites a Tribunal decision to support their position that reversing the amount attributable to inputs for exempted goods constitutes substantial compliance with Rule 6(3) post-amendment. After considering both sides' submissions, the Tribunal finds that the appellant indeed availed Cenvat credit through an Input Service Distributor and reversed the amount linked to exempted products as per Rule 6(3). Despite the lack of prior intimation to the authorities, the Tribunal acknowledges the appellant's prima facie case for waiver based on the evidence provided.

Consequently, the Tribunal allows the applications for the waiver of pre-deposit amounts and stays the recovery pending the appeal's disposal, emphasizing the appellant's compliance with the reversal requirements under Rule 6(3) despite procedural shortcomings.