2017 (5) TMI 381 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(3) of CCR - demand on the ground that assessee failed to maintain separate accounts in respect of inputs and input services used in the manufacture of dutiable and exempted products - Held that - Hon ble High Court of Allahabad in the case of CCE Vs. Asian Fertilizers Ltd. 2011 (8) TMI 1091 - ALLAHABAD HIGH COURT has allowed the appeal of the assessee by observing that assessee is not required to pay 8% of price of exempted goods for not maintaining separate records as Rule 6(3)(b) of CCR 2004 is not applicable on reversal - the demand has been confirmed on the appellant for taking irregular credit for the period 2005 2010. But the ratios laid down in the above mentioned case were also not available before the adjudicating authority. When it is so, for verification of credit of CENVAT, the findings have not been adequately elucidated in the impugned order - appeal allowed by way of remand.

Summary

Issues:
- Failure to maintain separate accounts for dutiable and exempted products
- Demand for payment of duty and penalties based on non-compliance

Issue 1: Failure to maintain separate accounts
The appellant, engaged in manufacturing various products, including an exempted fruit pulp-based drink, was required under Rule 6(3) of CENVAT Credit Rules to maintain separate accounts for inputs used in dutiable and exempted products. The appellant faced a demand for payment of 5%/10% of the value of the exempted goods due to not maintaining separate accounts for furnace oil, input services, and plastic crates. The appellant argued that they had reversed proportionate credit for furnace oil and input services, fulfilling their legal obligation. Regarding plastic crates, the appellant contended that since they were reused and the stock of old crates exceeded new ones, separate accounts were unnecessary. The Department insisted on the obligation to maintain separate accounts, placing the burden of proof on the appellant.

Issue 2: Demand for payment of duty and penalties
The Department demanded payment of over &8377;5.56 crores, along with penalties, for the alleged irregular credit taken by the appellant from 2005 to 2010. The appellant cited judicial precedents highlighting that reversal of credit could constitute non-availment of credit. The Department emphasized the appellant's obligation to maintain separate accounts or pay penalties. The Tribunal noted relevant court decisions, such as the Allahabad High Court and the Supreme Court rulings, which favored the appellants' arguments regarding credit reversal and non-availment of credit. The Tribunal found that the adjudicating authority had not adequately considered these legal principles and remanded the matter for a fresh examination, directing the authority to consider the cited case laws and provide the appellant with a fair opportunity to present their case.

In conclusion, the Tribunal allowed the appeals by way of remand, setting aside the impugned orders and directing a re-examination of the matter in light of the legal precedents cited by the appellant.