2016 (2) TMI 217 - AT - Central Excise

Cenvat Credit - manufacture of dutiable and exempted goods - Rule 6 - Quantity of inputs and proportionate credit availed, on the manufacture of dutiable final products - Held that - The entire demand has been worked out only on the basis of non-compliance of Rule 6(2) of CENVAT Credit Rules, 2002. Needless to mention that by virtue of Finance Act, 2010 an assessee has been allowed to reverse proportionate credit availed on the inputs that were used in the manufacture of exempted final products along with dutiable final products. Therefore, maintenance of separate inventories/stocks of inputs, maintenance of issue slips etc. became irrelevant. In the present case, the appellant all along have been claiming that they had availed CENVAT Credit only on the inputs that were used in the manufacture of dutiable final products, a fact remained undisputed by the Revenue even today, as is evident from the report of the Commissioner dated 09.07.2015. Hence, other issues raised by the Revenue about wrong calculation, reduction of demand etc. become irrelevant and accordingly not dealt with. Further, we find that for the subsequent period the department has accepted the formula adopted in availing the credit on inputs attributable to dutiable products and dropped the demands. In the result, the impugned order is set aside to the extent of confirming demand of ₹ 6,59,516/- and imposition of penalty of ₹ 3.00 Lakhs with interest and accordingly the assessee s appeal is allowed. - Decided against revenue

Issues:
1. Appeal against de novo Order No. 12-25/MP/Commr./08 dated 18/03/2008 by the Commissioner of Central Excise, Ranchi.
2. Compliance with Rule 6(2) of CENVAT Credit Rules, 2002 regarding maintaining separate accounts for dutiable and exempted final products.
3. Applicability of proportionate credit reversal under Section 72(1) of Finance Act, 2010.
4. Discrepancies in demand calculation and reduction by the Commissioner.
5. Acceptance of appellant's claim of availing CENVAT Credit only on inputs used for dutiable final products.

Analysis:

1. The Tribunal considered an appeal against the de novo Order No. 12-25/MP/Commr./08 dated 18/03/2008 by the Commissioner of Central Excise, Ranchi. The initial decision by the Tribunal was set aside by the Hon'ble High Court of Jharkhand, leading to a fresh consideration of the appeals by the Tribunal.

2. The central issue revolved around the compliance with Rule 6(2) of CENVAT Credit Rules, 2002, requiring separate maintenance of accounts for dutiable and exempted final products. The appellant argued that they maintained meticulous records and availed CENVAT Credit only for dutiable final products, as evidenced by letters to the proper officer.

3. The Tribunal addressed the applicability of proportionate credit reversal under Section 72(1) of the Finance Act, 2010. The appellant claimed to have reversed credit proportionately for inputs used in dutiable goods, not exempted products. The retrospective amendment allowed for such reversal with interest.

4. Discrepancies in demand calculation and reduction by the Commissioner were raised. The appellant contested the reduction in liability by the Commissioner, arguing that the reduction based on exempted inputs was irrelevant to the dispute. The Tribunal examined these calculations and found them incorrect.

5. The Tribunal accepted the appellant's claim of availing CENVAT Credit only on inputs used for dutiable final products. Reports from the field formation supported this claim, confirming that the appellant availed credit proportionately for dutiable goods only. The Tribunal noted that the entire demand was based on non-compliance with Rule 6(2) and that the appellant's method of availing credit was undisputed by the Revenue.

In conclusion, the Tribunal set aside the impugned order to the extent of confirming the demand and penalty, allowing the appellant's appeal. The Revenue's appeal was dismissed for lack of merit. The Tribunal highlighted the acceptance of the appellant's method of availing credit for dutiable products and the irrelevance of other issues raised by the Revenue.

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