2015 (10) TMI 1654 - AT - Central Excise

Reversal of CENVAT Credit - whether proportionate reversal of cenvat credit attributable to furnace oil is sufficient in compliance of Rule 6(3) of the said Rules or the appellant is required to pay duty equal to the 10% sale price of the exempted final products or not - Held that - Both lower authorities have not disputed that the appellant has reversed the cenvat credit attributable to furnace oil used in the manufacture of exempted final products. Therefore relying on the decision of Hon ble Gujarat High Court in the case of Rituraj Holdings Pvt. Ltd. (2013 (2) TMI 34 - GUJARAT HIGH COURT) wherein it has been held that if the assessee reversed proportionate cenvat credit attributable to final exempted product in this case the assessee has complied with Rule 6(3) of the Rules, is not required to pay duty equal to 10% sale price of the exempted final products. - Commissioner (Appeals) has observed that while reversal of cenvat credit, the appellant has taken the sale percentage of exempted goods i.e. agricultural implements as basis of calculation of proportionate credit, which is not correct and thereafter he denied the whole credit. The contention of the learned AR is not acceptable at all as in the show cause notice only charge against the appellant that they have contravened the provisions of Rule 6(3) and in their defence the appellant has stated that they are reversing proportionate cenvat credit. If at all there is difference, the Commissioner (Appeals) could quantify the demand which he failed to do so demanding duty from the appellant. It is not correct. Therefore, I set aside - Decided in favour of assessee.

Summary

Issues:
- Appeal against confirmed duty demand with interest
- Maintaining separate accounts for furnace oil
- Reversal of cenvat credit for exempted final products
- Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004

Analysis:
The appellant appealed against the confirmed duty demand with interest due to not maintaining separate accounts for furnace oil used in both dutiable and exempted final products. The appellant argued they periodically reversed proportionate cenvat credit for exempted final products as per the Apex Court's decisions. The Commissioner (Appeals) confirmed the demand with interest but dropped the penalty. The key issue was whether the reversal of cenvat credit for exempted products was sufficient under Rule 6(3) of the Rules.

The appellant contended that they complied with Rule 6(3) by reversing proportionate cenvat credit for exempted final products, citing relevant court cases. On the other hand, the AR argued that the appellant failed to maintain separate accounts for furnace oil as required, thus necessitating payment equal to 10% of the sale price of exempted products. The AR emphasized that the appellant did not follow the formula in Rule 6(3)(c)(i) for reversing cenvat credit.

The Tribunal deliberated on whether the appellant's reversal of cenvat credit for exempted products was adequate for Rule 6(3) compliance. Both lower authorities acknowledged the reversal but differed on the duty payment issue. Relying on a Gujarat High Court decision, the Tribunal ruled that if cenvat credit for exempted products was reversed proportionately, no additional duty payment was required. The Tribunal rejected the AR's objection regarding the calculation basis for the credit reversal, noting that the Commissioner (Appeals) failed to quantify any demand beyond the appellant's compliance with the rule. Consequently, the Tribunal set aside the impugned order and allowed the appeal with consequential relief.