2015 (11) TMI 1094 - AT - Central Excise

Denial of CENVAT Credit - Non maintenance of separate accounts - exempted goods - held that - Exemption has not been denied and if an assessee feels that it is not in a position to maintain separate accounts, the law provides a choice for paying the amount specified in Rules which has been paid. That being the position, prima facie, the department could not have taken a view that appellant should have availed exemption in total and not taken the Cenvat credit. The choice is available in the Rules and that should have been allowed. The only consideration that seems to have weighed in the minds of lower authorities when proceedings were initiated and orders were being passed is the fact that Cenvat credit availed by the appellant is more than the tax paid by them. It is not the case of the department that credit was taken wrongly. It is not the case of the department that exemption was availed wrongly. The department seems to be saying that exemption should have been availed and appellant should have maintained separate records or appellant should not have availed the exemption at all. In the absence of any logical or statutory provisions, supporting the stand taken by Revenue, the impugned order cannot be sustained. Accordingly, the appeal is allowed with consequential relief - Decided in favour of assessee.

Summary

Issues:
Applicability of exemption under Notification No. 10/97-C.E. for products cleared to BARC, validity of availing Cenvat credit without maintaining separate accounts, interpretation of Rule 6(3) of Cenvat Credit Rules, 2004.

Analysis:
The appellant imported housing assembly for pumps and used them in manufacturing process pumps for clearance to BARC under an exemption. The appellant paid 10% under Rule 6(3) of Cenvat Credit Rules, 2004, due to not maintaining separate accounts. The department initiated proceedings questioning the appellant's right to avail Cenvat credit for inputs used in exempted final products. The lower authorities contended that the appellant should have availed total exemption instead of taking Cenvat credit. However, the Tribunal found no logic in this argument, emphasizing that the law allows the choice of paying the specified amount under the rules when separate accounts cannot be maintained.

The Tribunal noted that the lower authorities' interpretation of the rules was flawed, as the appellant had followed the provisions correctly by paying the required amount under Rule 6(3). The Commissioner's observation regarding the failure to inform the Jurisdictional officer about maintaining separate records was deemed irrelevant since the appellant had complied with the rule by paying 10% of the value. The Tribunal highlighted that the department's argument lacked statutory support and logical reasoning, as there was no evidence of wrongful credit or exemption availing by the appellant.

Ultimately, the Tribunal held that the department's stance was unfounded, as there was no basis to deny the appellant's right to avail Cenvat credit under the given circumstances. The appeal was allowed in favor of the appellant, with the Tribunal emphasizing the clarity of rules and the appellant's adherence to the legal provisions. The judgment underscored the importance of following statutory provisions and upheld the appellant's right to avail exemptions and credits as per the law.