2016 (7) TMI 798 - AT - Central Excise

Cenvat / Modvat Credit - Manufacturing of dutiable and exempted goods - maintenance of separate records - it was observed by the Central Excise Officers that they availed modvat credit in respect of inputs namely cullet and other waste of glass falling under Tariff Item No. 7001.10 and used the same in the manufacture of final products which were chargeable to duty and other final products which were not chargeable to duty. They did not maintain separate accounts in respect of the said inputs used in the manufacture of dutiable goods and exempted goods, as envisaged under sub-rule (9) or rule 57CC of the erstwhile Central Excise Rules, 1944. Held that - the appellant had reversed the proportionate Cenvat credit on taxable input during the relevant period within the spirit of Rule 57CCC as introduced with retrospective effect vide the Finance Act, 2010. We further hold that the Id. Commissioner have erred in disbelieving the Certificate of Chartered Accountant which was based on the data and facts contained in the SCN dated 23/9/98 which, after verification, had been accepted by the Revenue in the subsequent order of adjudication. Thus, we hold that there was nothing much left for the Id. Commissioner to examine the same and except arithmetical accuracy of the amount reversed and interest if any, paid. Accordingly, we allow the appeal on merits. - Decided in favor of assessee.

Issues Involved:
1. Non-maintenance of separate accounts for inputs used in dutiable and exempted goods.
2. Reversal of MODVAT credit under Rule 57CC of the Central Excise Rules, 1944.
3. Calculation and payment of the amount under Section 69 of the Finance Act, 2010.
4. Verification of the amount paid by the appellant.
5. Entitlement to refund of the amount paid during the pendency of the dispute.

Detailed Analysis:

Non-maintenance of Separate Accounts:
The appellant, a manufacturer of glassware, did not maintain separate accounts for inputs used in the manufacture of dutiable and exempted goods, as required under sub-rule (9) of Rule 57CC of the erstwhile Central Excise Rules, 1944. Consequently, the appellant calculated the amount of credit attributable to the inputs used in the manufacture of exempted final products on a prorata basis and reversed the same.

Reversal of MODVAT Credit:
The department contended that the appellant should have paid an amount equal to 8% of the value of the exempted goods at the time of their clearance from the factory, as per sub-rule (1) of Rule 57CC. The appellant had reversed an amount of ?5,473/- but the department demanded a balance of ?9,28,815/- as the appellant had cleared exempted goods valuing ?1,16,78,603/- during the relevant period.

Calculation and Payment under Section 69 of the Finance Act, 2010:
The appellant argued that under Section 69 of the Finance Act, 2010, which amended the Central Excise Rules, 1944 with retrospective effect, the demand raised by the department was no longer tenable. The appellant had already paid the amount in accordance with the provisions of the amended rules and submitted a certificate from a Chartered Accountant certifying the amount of input credit attributable to the inputs used in the manufacture of exempted final products.

Verification of the Amount Paid:
The Commissioner rejected the appellant's application, stating that the Chartered Accountant's certificate was based on figures from a show cause notice and not verified from the books of accounts, which were not available. The Commissioner also noted that the records were not available with the Divisional/Range Office for verification.

Entitlement to Refund:
The Tribunal found that the appellant had reversed the proportionate Cenvat credit on taxable input during the relevant period within the spirit of Rule 57CCC as introduced with retrospective effect by the Finance Act, 2010. The Tribunal held that the Commissioner erred in disbelieving the Chartered Accountant's certificate, which was based on the data and facts contained in the show cause notice dated 23/9/98. The Tribunal allowed the appeal on merits and remanded the matter to the Commissioner for verifying the arithmetical accuracy of the amount reversed and the interest, if any, payable. The appellant was held entitled to a refund of the amount deposited during the pendency of the appellate proceedings, with interest as per rules after adjustment of dues, if any, payable pursuant to this order.

Conclusion:
The Tribunal allowed the appeal, remanding the matter to the Commissioner for verification of the arithmetical accuracy of the amount reversed and the interest payable. The appellant was entitled to a refund of the amount deposited during the pendency of the dispute, with interest as per rules. The Tribunal emphasized that the Commissioner should have relied on the data from the show cause notice, which was accepted by both parties.

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