2017 (4) TMI 154 - AT - Central Excise

Reversal of CENVAT credit - common inputs used for manufacture of exempted as well as taxable goods without maintenance of books of accounts - Held that - since the appellant had reversed proportionate cenvat credit attributable to common inputs used for manufacture of dutiable as well as exempted goods the same is in conformity with the above amended provisions of Rule 6(3A)(b) ibid. However since the appellant has not determined and paid the cenvat credit on inputs used for manufacturer of exempted goods on monthly basis in my opinion it is liable to pay interest for late reversal on cenvat credit - the appellant is liable to pay interest at the prescribed rate on the amounts paid belatedly on proportionate basis towards inputs used in exempted goods - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Appeal against order of Commissioner of Customs and Central Excise
2. Non-payment of 5% / 10% amount under Rule 6(3)(i) of Cenvat Credit Rules, 2004
3. Reversal of cenvat credit on exempted goods
4. Interpretation of Rule 6 of Cenvat Credit Rules, 2004
5. Liability to pay interest on late reversal of cenvat credit

Analysis:
1. The appeal challenged the order of the Commissioner of Customs and Central Excise (Appeals-I), Jaipur. The appellant, engaged in manufacturing Antibiotics, Hydrocortisone, and Quinine Sulphate, faced a demand of ?20,79,378/- and an equal penalty for not paying the 5% / 10% amount under Rule 6(3)(i) of the cenvat credit rules, 2004. The Commissioner upheld the demand, leading to the appeal before the Tribunal.

2. The appellant argued that upon audit findings regarding cenvat credit on exempted goods, they reversed the credit proportionately. The packing material and inputs used were common for both dutiable and exempted goods, and the appellant reversed the credit accordingly. Citing a Tribunal decision, the appellant contended they were not required to pay the 5% / 10% amount on exempted services.

3. The Tribunal examined Rule 6 of the Cenvat Credit Rules, 2004, amended by the Finance Act, 2010. The appellant's reversal of proportionate credit on common inputs was deemed compliant with the amended provisions. However, the appellant was held liable to pay interest for late reversal of cenvat credit on inputs used for manufacturing exempted goods.

4. The judgment distinguished a previous case cited by the Revenue, noting it was delivered before the amendment of Rule 6. The impugned order was set aside concerning the payment under Rule 6(3)(b) and penalty imposition. The appellant was directed to pay interest at the prescribed rate for belated payments on a proportionate basis for inputs used in exempted goods.

5. In conclusion, the Tribunal disposed of the appeal by setting aside the order for payment under Rule 6(3)(b) and penalty, while directing the appellant to pay interest for late reversal of cenvat credit on inputs used for manufacturing exempted goods.