2021 (7) TMI 1347 - AT - Central Excise

CENVAT Credit - dutiable as well as exempt goods - non-maintenance of separate records - whether the demand raised in the impugned order by invoking Rule 6(3)(b) of the Credit is legally sustainable whereby the amount of 10% of the value of exempted goods has been considered as ineligible credit - Time Limitation - Penalty - HELD THAT - The issue is decided in the case of DR. WRITER S FOOD PRODUCTS PVT. LTD. VERSUS COMMR. OF C. EX., PUNE-II 2009 (3) TMI 846 - CESTAT, MUMBAI where it was held that The appellants, in the case before us, have not only reversed the credit of Rs. 70,21,383/- but also paid the interest of Rs. 4,71,189/-. We feel that by doing so, the appellants, have undone the act of taking/utilizing the credit, it amounts to not taking the credit and, therefore, they are not required to pay an amount equal to 10%. Since the legal position stands settled in favour of the assessee, there are no reason to take a contrary view. In the facts of the present case, since it is found that the credit amount attributable to clearance of exempted goods stands already reversed which fact is on record, there is no justification to saddle the assessee with disproportionate demand by mechanically applying the formula of 10% of the value of exempted goods, moresoever when credit has not been availed of such huge amount. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Central excise duty demand under Rule 6(3)(b) read with Rule 14 of the Cenvat Credit Rules, 2004 for the period of September 2006 to September 2008.

Analysis:
The appellant, engaged in manufacturing railway wagons and allied products, contested a central excise duty demand for clearing goods to Indian Railways and Ministry of Defence under specific exemptions. The demand was raised under Rule 6(3)(b) due to alleged lack of separate records for dutiable and exempted goods. The appellant maintained that they only availed credit for dutiable goods, with records segregating both types of goods. They voluntarily reversed Cenvat credit for exempted goods during adjudication, which was accepted by the Commissioner. The appellant cited legal precedents supporting their position, emphasizing that reversing credit with interest constitutes not availing the credit. The Tribunal's decision in similar cases supported the appellant's argument that reversing credit post-utilization equates to not taking the credit, thereby exempting them from the 10% demand.

The Tribunal's analysis of the case highlighted the importance of reversing credit before utilization to avoid penalties. Citing relevant legal judgments, the Tribunal emphasized that reversing credit and paying interest post-utilization negates the need to pay the 10% demand. The Tribunal found the appellant's actions in line with legal requirements, as they had reversed the credit for exempted goods and paid interest, aligning with the principles outlined in previous judgments. Consequently, the Tribunal set aside the demand, as the appellant had already reversed the credit for exempted goods, rendering the demand unjustified. The decision was based on settled legal positions favoring the appellant, leading to the allowance of the appeal with consequential relief, without delving into the plea of limitation.