2015 (10) TMI 873 - AT - Central Excise

Demand of 10% of the value of exempted goods in terms of provisions of Rule 6(3) of Cenvat Credit Rules, 2004 - Held that - As the appellant has complied with the conditions of section 68-73 of the Finance Act 2010 and reversed Cenvat Credit along with interest attributable to the final exempted goods, the said reversal is sufficient and appellant is not required to pay 10% of the value of the exempted goods. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Appeal against orders demanding 10% of the value of exempted goods under Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The appellants, manufacturers of dutiable and exempted products, faced demands for 10% of the value of exempted goods due to not maintaining separate accounts for inputs used in both types of products. The counsel argued citing section 68 of the Finance Act 2010, stating that by reversing Cenvat Credit on inputs for exempted products along with interest, the 10% value payment is not required. The counsel contended that the appellant had complied with the reversal requirements, and the adjudicating authority had acknowledged the correctness of the credit reversal. The Tribunal noted the compliance with sections 68-73 of the Finance Act 2010 and the reversal of Cenvat Credit with interest for exempted goods, thus ruling that the reversal sufficed, and the appellant was not liable to pay 10% of the exempted goods' value. Consequently, the impugned orders were set aside, and the appeals were allowed with any consequential relief.

This case involved a crucial issue of demands for 10% of the value of exempted goods under Rule 6(3) of Cenvat Credit Rules, 2004, due to the appellants' failure to maintain separate accounts for inputs used in dutiable and exempted products. The legal argument centered on the interpretation of section 68 of the Finance Act 2010, which exempted the 10% payment if Cenvat Credit on inputs for exempted goods was reversed with interest. The Tribunal analyzed the compliance with the Finance Act provisions and the correctness of the credit reversal, ultimately ruling in favor of the appellant based on the fulfillment of the reversal requirements and setting aside the demands for 10% payment on exempted goods.

The judgment provided clarity on the application of section 68 of the Finance Act 2010 in cases involving demands for 10% of the value of exempted goods under Rule 6(3) of Cenvat Credit Rules, 2004. By emphasizing the importance of reversing Cenvat Credit on inputs for exempted products along with interest, the Tribunal established that such reversal sufficed to exempt the appellant from the additional payment obligation. The decision underscored the significance of compliance with statutory provisions and the correct interpretation of relevant legal frameworks in resolving disputes related to Cenvat Credit and exempted goods' valuation.