2017 (3) TMI 240 - AT - Central Excise

CENVAT credit - Rules 6(3) of the Cenvat Credit Rules, 2004 - the appellant was not maintained separate account of input/input services - demand of 10% of the value of exempted final products - Held that - As it is clear that the appellant has already reversed the Cenvat Credit attributable to final exempted goods therefore, we hold that the appellant is not required to pay 10% of the value of the exempted goods. Interest - Held that - since the appellant have reversed the Cenvat credit without utilization, the demand of interest is also not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is required to reverse 10% of the value of exempted final goods or not.

Analysis:
The judgment involves an appeal against an order where the appellant, a manufacturer of dutiable and exempted final products, was demanded to pay 10% of the value of exempted final products for not maintaining separate accounts of input/input services as per Rule 6(3) of the Central Credit Rules, 2004. The appellant argued that they had already reversed the amount and maintained a sufficient balance in the Cenvat Credit account, thus the proceedings should be dropped. However, the Adjudicating Authority held that since the appellant did not reverse the credit before the clearance of exempted goods, they were liable to pay the demanded amount along with interest and penalty.

The main issue before the tribunal was whether the appellant was required to reverse 10% of the value of exempted final goods. The tribunal referred to a similar case where it was observed that the reversal of credit after the clearance of final products could absolve the appellant from the liability to pay 10% of the total price of exempted products. The tribunal also cited judgments from the Allahabad High Court and the High Court of Gujarat, emphasizing the importance of reversing credit before utilization and before clearance of exempted goods to be considered as not taking the credit.

The tribunal found that the appellant had already reversed the Cenvat Credit attributable to final exempted goods, concluding that the appellant was not required to pay 10% of the value of exempted goods. Additionally, since the appellant had reversed the credit without utilization, the demand for interest was deemed unsustainable based on a decision of the High Court of Karnataka. Consequently, the penalty on both appellants was held to be not imposable. Therefore, the impugned order was set aside, and the appeals were allowed with consequential relief, if any.