2015 (1) TMI 635 - AT - Central Excise

CENVAT Credit - Non maintenance of separate accounts for common input services used for dutiable and exempted final products - benefit of Rule 6 (5) of the Cenvat Credit Rules, 2004 - Reversal of credit pertaining to the exempted goods under Rule 6(3) (b) - Held that - The appellants by their letter dated 21.04.2006, informed that they have reversed the input credit attributable to the exempted goods and paid according to their calculations, which was recorded in the show cause notice. The Adjudicating authority conducted verification of reversal of credit through the jurisdictional Assistant Commissioner. By letter dated 20.01.2011, the Assistant Commissioner informed that the input service credit attributable to the exempted goods cleared during the relevant period would be ₹ 16,64,309/- instead of ₹ 2,85,985/-. After accepting the claim of the appellants under Rule 6(5) of the said Rules, the Adjudicating authority reduced the amount to ₹ 4,33,778/-. We find that the verification report of the Assistant Commissioner was not disclosed to the appellants. The amount of ₹ 4,33,778/- as observed by the Adjudicating authority was also not informed to the assessees for compliance of the retrospective amendment under Section 73 of the Finance Act, 2010. In our considered view, the appellants should be given an opportunity to defend the report dated 20.11.2011, for determination of the amount of reversal of credit under retrospective amendment under Section 73 of the Finance Act, in the interest of justice. - Matter remanded back - Decided in favour of assesse.

Issues involved:
1. Early hearing of appeal and stay petition.
2. Demand of amount for exempted goods.
3. Reversal of credit under Rule 6(3)(b) and Rule 6(5) of Cenvat Credit Rules, 2004.
4. Verification report discrepancy.
5. Compliance with retrospective amendment under Section 73 of the Finance Act, 2010.
6. Opportunity for defense and remand of the matter.

Analysis:
1. The Revenue applied for early hearing of the appeal, while the Assessee filed for early hearing of the stay petition. The Assessee also requested an interim order to prevent coercive action by the Revenue until a decision on the stay application. The Tribunal, with consent from both sides, proceeded to hear the stay petition and eventually decided to take up the appeal for hearing after disposing of the stay application.

2. The appellants were involved in manufacturing both dutiable and exempted goods. A Show Cause Notice was issued proposing a demand for an amount related to exempted goods cleared during a specific period. The appellants contended that they had reversed the credit for exempted goods, but the adjudicating authority confirmed the demand along with interest, without imposing a penalty.

3. The Adjudicating authority conducted verification of the credit reversal claimed by the appellants. A discrepancy arose regarding the amount of credit attributable to exempted goods. The appellants claimed the benefit of Rule 6(5) of the Cenvat Credit Rules, but the authority, due to non-compliance with a retrospective amendment, confirmed the demand as proposed in the show cause notice.

4. The appellants disputed the formula adopted in the verification report, which was not disclosed to them initially. The Revenue argued that the appellants did not fulfill the conditions of the retrospective amendment and had made payments under incorrect codes and accounting heads.

5. The Tribunal observed that the appellants were not given a chance to defend the verification report's findings or comply with the retrospective amendment under Section 73 of the Finance Act, 2010. In the interest of justice, the matter was remanded back to the Adjudicating authority for a fresh decision after considering the appellants' submissions and providing them with the verification report.

6. The Tribunal set aside the impugned order, directed the Adjudicating authority to supply the verification report, and emphasized giving the appellants a reasonable opportunity before making a decision. All issues were kept open for the Adjudicating authority's decision, and the appeal was allowed by way of remand, with the stay petition and other applications being disposed of.

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