2017 (1) TMI 231 - AT - Central Excise

Reversal of Cenvat credit on input services - Rule 6 (3A) of CER - appellant has failed to exercise option and follow procedural prescribed under Rule 6(3A) - Held that - the Commissioner is not justified in insisting that appellant reverse cenvat credit in terms of Rule 6(3)(i) of Cenvat Credit Rules. The claim of the appellant is that they have already reversed on proportionate basis, the cenvat credit along with interest amount payable in terms of Rule 6(3A) - Appeal allowed by way of remand.

Summary

Issues:
- Reversal of cenvat credit for exempted goods produced
- Procedural requirements under Rule 6(3A) of the Cenvat Credit Rules, 2004
- Entitlement to benefit under Finance Act, 2010 for reversing credit attributable to non-dutiable goods

Analysis:
1. Reversal of Cenvat Credit for Exempted Goods Produced:
The appellant, engaged in sugar and molasses production, faced demands for reversal of credit on bagasse and electricity under Rule 6(3A). The Commissioner allowed proportionate reversal for the period up to 31.3.2008 but demanded a significant amount post that date, citing failure to exercise the option for credit reversal. The appellant argued that they had already reversed credit proportionately as per Rule 6(3A, and the Commissioner's insistence on a different method was unjustified.

2. Procedural Requirements under Rule 6(3A) of the Cenvat Credit Rules, 2004:
The Tribunal referred to a previous case where it was held that the requirement to intimate the Department under Rule 6(3A) is procedural and delays in such matters can be condoned. The Tribunal emphasized that the substantive right to choose the method of credit reversal cannot be denied due to procedural lapses. The appellant's choice of proportionate reversal should be respected, and the Department can verify the adequacy of the reversal made by the appellant.

3. Entitlement to Benefit under Finance Act, 2010 for Reversing Credit Attributable to Non-Dutiable Goods:
The Commissioner, relying on a circular, denied the appellant the benefit of reversing credit attributable to non-dutiable goods, considering bagasse as a marketable commodity. However, the Tribunal found that the appellant's chosen method of reversal should be validated, and the matter was remanded to the original authority for verification, ensuring the appellant's opportunity to present necessary records.

In conclusion, the Tribunal set aside the impugned orders and remanded the matter for verification, emphasizing the appellant's right to choose the method of credit reversal and the Department's duty to ensure compliance without denying substantive rights based on procedural lapses.