2017 (4) TMI 738 - AT - Central Excise

CENVAT credit - Rule 6(3)(b) of CCR 2004 - manufacture of both dutiable as well as exempted finished goods - non-maintenance of separate books - demand of 10% of the value of the exempted products - Held that - by virtue of retrospective amendment to Rule 6 of CCR 2004 in the FA, 2010, an assessee is eligible to reverse proportionate Cenvat Credit on Inputs attributable to the exempted products - In the present case also, there is no dispute of the fact that the appellant had already reversed the proportionate credit on the Inputs attributable to the exempted products with interest, hence, the impugned order is accordingly set aside - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Appeal challenging setting aside demand for extended period
- Appeal challenging confirmation of duty and penalty

Analysis:
1. The case involved two appeals filed against the same Order-in-Original (OIA) passed by the Commissioner of Central Excise and Customs. The Revenue appealed against the setting aside of the demand for the extended period, while the party appealed against the confirmation of duty and penalty.

2. The appellants were involved in manufacturing both dutiable and exempted finished goods, availing Cenvat Credit on Inputs used for both types of goods without maintaining separate records. As a result, they reversed the proportionate Cenvat Credit on Inputs used for exempted products. The dispute arose when the authorities demanded 10% of the value of the exempted products due to the lack of separate records, as per Rule 6(3)(b) of CCR 2004. The Commissioner (Appeals) confirmed the demand for the normal period with an equal amount of penalty.

3. The appellant's advocate argued that since they had already reversed the proportionate Cenvat Credit on Inputs for exempted products, demanding 10% of the value was unjustified. Referring to a previous Tribunal decision considering the retrospective amendment to Cenvat Credit Rules 2004 under the Finance Act 2010, which allowed reversal of proportionate credit for exempted goods, the advocate requested the appeal to be allowed.

4. The Revenue's authorized representative supported the Commissioner (Appeals) findings and appealed on the extended period grounds. The Tribunal noted that previous decisions had allowed appeals where proportionate Cenvat Credit had been reversed for exempted products due to the retrospective amendment in the Finance Act 2010. Since the appellant had already reversed the proportionate credit with interest, the impugned order was set aside, and the party's appeal was allowed. Consequently, the Revenue's appeal was dismissed for lacking merit.