2015 (8) TMI 24 - AT - Central Excise

Reversal of Cenvat Credit - various option available as per Rule 6 of CCR - whether appellant is required to pay 5% of total sale value of the goods traded by them in terms of Rule 6(3)(i) when the appellant paid the actual credit attributed to the quantum trading sale in terms of Rule 6(3A) alongwith interest following the option available under Rule 6(3)(ii) - Held that - Appellant has availed Cenvat Credit in respect of common input services, which has been used in relation to the manufacture of the final product as well as for trading of bought out cars. Therefore they are supposed to pay an amount equivalent to Cenvat Credit which is attributed to the input service used for exempted service i.e. sale of car. In our view, three options have been provided under rule 6(3) and it is up to the assessee that which option has to be availed. Revenue could not insist the appellant to avail a particular option. In the present case the appellant have admittedly availed option as provided under Rule 6(3)(ii) and paid an amount as required under sub rule (3A) of Rule 6. - as per the provision, payment on monthly basis is provisional basis, therefore it is not mandatory that whole amount or part of the amount as required to be paid on every month. The appellant though belatedly calculated the amount required to be paid in terms provided under Rule (3A) of Rule 6, therefore to fulfil the condition, assessee should pay the said amount, which has been complied by the appellant. Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub rule (3) of Rule 6, there is no provisions that if the assessee does not opt any of the option at a particular time, then option of payment of 5% will automatically be applied. Therefore we do not understand that when the appellant have categorically by way of their intimation opted for option provided under sub-rule (3)(ii), how Revenue can insist that option (3)(i) under Rule 6 should be followed by the assessee. Demand confirmed by the adjudicating authority has no legs and therefore the same can not be sustained - Decided in favour of assessee.

Issues Involved:
1. Demand of Rs. 24,71,93,529/- under Rule 6(3D) of Cenvat Credit Rules, 2004.
2. Recovery of interest on the confirmed demand.
3. Imposition of penalty of Rs. 24,71,93,529/-.
4. Compliance with procedural requirements under Rule 6(3A) of Cenvat Credit Rules, 2004.

Issue-wise Detailed Analysis:

1. Demand of Rs. 24,71,93,529/- under Rule 6(3D) of Cenvat Credit Rules, 2004:
The appellant, engaged in manufacturing and trading activities, availed Cenvat credit on input services used for both activities. The department alleged non-compliance with Rule 6(3A) and demanded 5% of the value of traded goods, totaling Rs. 24,71,93,529/-. The appellant argued they had correctly reversed the proportionate credit and paid interest, thus complying with Rule 6(3A). The tribunal found that the appellant had opted for the option under Rule 6(3)(ii) and paid the required amount, thus the demand of Rs. 24,71,93,529/- was not justified.

2. Recovery of interest on the confirmed demand:
The department ordered recovery of interest on the confirmed demand. The appellant had already paid interest of Rs. 20,993/- on the reversed credit amount. The tribunal noted that the appellant had complied with the interest payment requirement for any delay, thus no additional interest was warranted.

3. Imposition of penalty of Rs. 24,71,93,529/-:
A penalty equal to the demand amount was imposed under Rule 15(2) of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. The tribunal found that since the demand itself was not sustainable, the penalty imposed was also unjustified and set it aside.

4. Compliance with procedural requirements under Rule 6(3A) of Cenvat Credit Rules, 2004:
The department contended that the appellant did not comply with procedural requirements such as intimation to the superintendent and monthly provisional payments. The appellant argued that they had provided the necessary information and that procedural lapses should not lead to such a high demand. The tribunal observed that the appellant had substantially complied with the requirements and that procedural lapses, if any, were minor and did not justify the imposition of the demand under Rule 6(3)(i).

Conclusion:
The tribunal concluded that the appellant had complied with the substantive provisions of Rule 6(3)(ii) and Rule 6(3A) by reversing the proportionate credit and paying interest. The demand of Rs. 24,71,93,529/-, interest on this amount, and the penalty were set aside as they were not justified. The appeal was allowed, and the impugned order was annulled.

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