2017 (3) TMI 652 - AT - Central Excise

Reversal of CENVAT credit - manufacture of dutiable as well as exempt goods - proportionate credit availed on common input services used for manufacture of exempted goods like rectified spirit and excisable good namely electricity - whether electricity which is shown as no rate of duty in the tariff is an exempted product or not? - Held that - though appellants may be eligible for the credit of input services used for manufacture of electricity consumed captively they are not eligible for credit of electricity sold outside. The proportionate credit has to be reversed. However there is no discussion in the orders in regard to whether appellant is using the entire electricity captively - for the limited purpose of verifying whether appellant is selling electricity outside and therefore requires to reverse the proportionate credit, the matter requires to be remanded. Extended period of limitation - Held that - the appellant has filed regular ER-1 returns and have disclosed the credit availed by them. In such back ground, it cannot be alleged that the appellant is guilty of willful suppression of facts. Apart from the vague allegation there is no evidence to establish that appellants have willfully suppressed facts - extended period not invokable - However the demand raised for the normal period in respect of rectified spirit as well as electricity sold outside will have to be sustained. Appeal partly allowed and partly remanded.

Summary

Issues:
1. Irregular CENVAT Credit availed on common input services for manufacturing both dutiable and exempted goods.
2. Allegation of suppression of facts and invoking the extended period of limitation.

Analysis:

Issue 1: Irregular CENVAT Credit
The appellants were accused of availing irregular CENVAT Credit on common input services used for manufacturing both dutiable and exempted goods without maintaining separate accounts. The Show Cause Notice proposed to recover the availed amount, including interest and penalty. The appellant argued that electricity should not be considered an exempted product and that the demand related to electricity was unsustainable. The department considered rectified spirit and electricity as exempted products and calculated the proportionate credit to be reversed. The tribunal noted that electricity, with a nil rate of duty, could be considered an exempted final product. However, the demand in respect of electricity was deemed unsustainable unless sold outside, in which case the proportionate credit had to be reversed. The matter was remanded for verification if electricity was sold outside.

Issue 2: Allegation of Suppression of Facts and Limitation
The appellant contested the allegation of suppression of facts and the invocation of the extended period of limitation. The tribunal observed that the appellant had disclosed the credit availed in regular returns and had been subject to previous Show Cause Notices and audits covering the same period. It was concluded that there was no evidence of willful suppression of facts, and the Show Cause Notice invoking the extended period of limitation could not be sustained. However, the demand for the normal period concerning rectified spirit and electricity sold outside, if any, was upheld. The penalty for the normal period was set aside, considering that the appellants had paid duty on molasses but had not availed credit on them.

In conclusion, the tribunal set aside the demand beyond the normal period as time-barred, modified the impugned order to exclude demand, interest, and penalty beyond the normal period, upheld the demand for rectified spirit for the normal period, and remanded the matter for verifying the sale of electricity outside and reversing the proportionate credit accordingly. The appeal was partly allowed and partly remanded for further action.