2017 (5) TMI 395 - HC - Central Excise

CENVAT credit - reversal - Rule 6(3)(b) of the CCR 2004 - maintenance of separate books of accounts - Held that - Tribunal remanded the matter to the Adjudicating Authority, to not only verify the said fact but to also ascertain the exact amount of Cenvat credit qua which reversal has, purportedly, been carried out by the Assessee/ first respondent - appeal allowed by way of remand.

Summary

Issues involved: Challenge to final order of Customs, Excise and Service Tax Appellate Tribunal; Interpretation of Rule 57CC of Central Excise Act; Reversal of Cenvat credit prior to issuance of show cause notice; Verification of Cenvat credit reversal and interest liability.

Analysis:

1. The appeal was filed under Section 35 G (2) of the Central Excise Act, 1944, challenging the final order dated 01.07.2009 by the Customs, Excise and Service Tax Appellate Tribunal, Chennai Bench. The issue involved was related to the interpretation of Rule 57CC of the Act, as highlighted by the learned counsel for the Revenue, Ms. Hemalatha, referring to a Division Bench judgment of the Madras High Court.

2. The case involved the clearance of boilers without duty payment to BARC, Vishakapatnam, and Bombay, along with availing CENVAT credit on input services without maintaining separate accounts. Rule 6(3)(b) of the CENVAT Credit Rules 2004 was invoked by the Revenue to demand 10% of the net sale price of exempted goods, leading to the appeal by the assessee. It was acknowledged that there was no dispute regarding the facts presented.

3. The Division Bench judgment discussed the implications of Rule 57CC, emphasizing that a manufacturer engaged in the production of both dutiable and exempted products must pay 8% of the price of exempted products if separate accounts are not maintained. The judgment highlighted the requirement for maintaining separate books of accounts to claim benefits under the Act and the necessity of timely application with supporting documentation.

4. The Division Bench observed that the reversal of CENVAT credit before the issuance of a show cause notice amounts to payment of duty. Consequently, the Tribunal remanded the case to verify the CENVAT credit reversal and determine the exact amount reversed by the Assessee. Additionally, the Tribunal directed the Adjudicating Authority to verify the claim that the Assessee was not liable to pay interest due to a sufficient balance in the RG 23A account at the relevant time.

5. The Court found no reason to interfere with the Tribunal's judgment and dismissed the appeal without costs, closing the connected pending application. The decision upheld the Tribunal's direction for further verification and assessment of the CENVAT credit reversal and interest liability, ensuring compliance with the relevant provisions of the Central Excise Act.