2015 (10) TMI 877 - AT - Central Excise

Denial of CENVAT Credit - Non maintenance of separate accounts - contravention of the provision of Rule 6 of the CENVAT Credit Rules, 2004 - Invocation of extended period of limitation -held that - When the audit objection was raised they have already reversed the CENVAT Credit attributable to coal handling charges which was ultimately used for generation of steam, which was used for generation of electricity, which was ultimately used for manufacture of final exempted product along with interest. In that circumstances, the show cause notice was not required to be issued. Ld. counsel for the appellant has also contested the issue of limitation to say that when periodical audits were conducted, extended period of limitation is not invokable. But he fairly conceded that if reversal of CENVAT Credit along with interest is found to be sufficient in that case, he will not contest the issue of limitation. As observed hereinabove, we hold that the CENVAT Credit reversed by the appellant along with interest is sufficient in this matter as per the Finance Act, 2010 and the show cause notice was not required to be issued. Therefore, impugned proceedings against the appellant are set aside - Decided in favour of assessee.

Summary

Issues:
Appeal against impugned order demanding duty, interest, and penalty under Rule 6 of the CENVAT Credit Rules, 2004 for using steam in the manufacturing process of both dutiable and exempted final products without maintaining separate accounts.

Analysis:

1. The appellant, a manufacturer of dutiable and exempted final products, faced demands for duty, interest, and penalty due to using steam in manufacturing processes without separate accounts. The Revenue alleged a violation of Rule 6 of the CENVAT Credit Rules, 2004, holding the appellant liable for payment equal to a percentage of the final exempted product. Proceedings were initiated for the period January 2007 to October 2010 through a show cause notice invoking an extended period of limitation. The appellant contested the demands.

2. The appellant's counsel argued that upon audit pointing out the ineligibility for CENVAT Credit on coal handling services used for generating steam for the exempted product, the appellant reversed the credit with interest. The counsel contended that the initiation of proceedings was unnecessary post-reversal and challenged the sustainability of the extended limitation invocation. The counsel emphasized that periodic audits had previously confirmed the appellant's entitlement to the credit.

3. In response, the Revenue's representative opposed the appellant's contentions, highlighting contradictory statements made by the appellant during proceedings regarding the CENVAT Credit on coal handling charges. The Revenue argued that the reversal of credit for generating steam for the exempted product constituted a violation of Rule 6 of the CENVAT Credit Rules, 2004, necessitating payment based on the value of the final exempted product.

4. After hearing both parties, the Tribunal found that the appellant had indeed reversed the CENVAT Credit related to coal handling charges used for generating steam for the exempted product, rendering the show cause notice unnecessary. The Tribunal agreed that the reversal, along with interest, sufficed as per the Finance Act, 2010. Consequently, the impugned proceedings were set aside, and the appeal was allowed with any consequential relief.