2017 (2) TMI 830 - AT - Central Excise

Reversal of CENVAT credit - demand on the ground that the appellant have not followed the procedure as laid down in Rule 6(2) of Cenvat Credit Rules inasmuch they have not maintained the separate account - Held that - the product being a medicament, it is a statutory requirement to maintain the batch records which the appellant is maintaining. They are also maintaining Bin cards for the consumption of the inputs. On the basis of that record, the appellants have been reversing the credit proportionate to the inputs used in the exempted goods - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of credit on common inputs for manufacturing exempted medicaments.
2. Allegation of not maintaining separate accounts as per Cenvat Credit Rules.
3. Dispute regarding the demand for payment of 8% of the value of exempted goods.
4. Appeal against the Commissioner (Appeals) decision upholding the demand and penalty.

Analysis:
1. The appellants, engaged in manufacturing medicaments falling under Chapter heading 30.03, produced certain exempted medicaments under notification no. 6/2002-CE dated 01.03.2002. They availed credit on common inputs like Methyl parabene, propyl parabene, etc., used as excipients, and reversed proportionate credit for inputs used in exempted goods.

2. The adjudicating authority demanded 8% of the value of exempted goods, alleging non-compliance with Rule 6(2) of Cenvat Credit Rules due to the absence of separate accounts. The Commissioner (Appeals) upheld the demand and penalty, except for a portion. The appellant contested this, claiming compliance with Rule 57CC of Central Excise Rules, 1944, and Cenvat Credit Rules, 2004, supported by maintaining batch records and Bin cards for input consumption.

3. The appellant argued that by reversing proportionate cenvat credit, they essentially did not avail the credit, rendering the 8% demand unjustified. Citing precedents like Wonderax Laboratories and Mahindra & Mahindra, the appellant sought relief from the demand. The revenue reiterated the findings of the impugned order.

4. The Member (Judicial) analyzed the submissions and noted the appellant's proactive reversal of cenvat credit for common inputs used in exempted goods. Acknowledging the statutory requirement of maintaining batch records for medicaments, the Member found the appellant's method of reversing credit based on batch records and Bin cards appropriate. Consequently, the impugned order was modified, and the appeal was allowed, emphasizing the appellant's compliance with credit reversal procedures.

This judgment highlights the importance of maintaining proper records and following prescribed procedures for availing and reversing credits under Cenvat rules, ensuring compliance with statutory requirements to avoid unnecessary demands and penalties.