2017 (7) TMI 677 - AT - Central Excise

CENVAT credit - exempted goods - by-product, silver - The Revenue entertained a view that silver being an exempted product, the Cenvat credit attributable to inputs and input services used in the manufacture of such silver should be reversed in terms of provisions of Rule 57AD/Rule 6, as applicable during the relevant time - Held that - It is apparent that the legal provisions applicable to the facts of the present case are clear to the effect that Cenvat credit attributable to inputs used in or in relation to manufacture of exempted goods is to be reversed. The relevant point to note here is that the Revenue itself categorically admitted in the appeal that it is not a case here, where common inputs are used both for the manufacture of dutiable and exempted goods in two separate processes. Segregation of quantity of inputs which is attributable to dutiable and exempted goods in an integrated process is not possible. The Revenue further admitted that quantification of proportionate quantity of input used in exempted goods is not possible in the case like the present one - We find no legal basis for the assertion made by the Revenue to arrive at the proportion of Cenvat credit to be reversed, should be based on value of exempted products. In the present case, all the inputs have been put to intended use and it is not the case that some portion of input is not put into use in the manufacture of zinc and lead. This position has been admitted by the Revenue also. If such is the case there can be no input which is solely attributable to the manufacture of small quantity of by-product namely, silver. The said silver is extracted as a by-product by the respondent whose intended/main manufacturing process is aimed at manufacture of non-ferrous metal like zinc and lead. The respondent also obtain various other by-products like sulphuric acid etc. In fact with reference to sulphuric acid emerging as a by-product, it was held in the respondent s own case that there is no need for reversal of Cenvat credit on proportionate basis in Hindustan Zinc Limited Vs. CCE, Jaipur II 2004 (1) TMI 283 - CESTAT, NEW DELHI . The respondents fulfilled the condition as stipulated in the Finance Act, 2010 by reversing proportionate credit in 2002-2003 itself and by paying interest on the same. We also note that the Commissioner was to verify the correctness of amount paid within a period of two months from the date of receipt of application and in case the amount so paid is less than the amount payable, he shall call upon the applicant to pay the differential amount alongwith interest which shall be paid within 10 days. Considering the legal provision, as mentioned in Section 70 of the Finance Act, 2010 and the facts of the present case, we find no infirmity in the finding recorded by the Original Authority. Appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Reversal of Cenvat credit attributable to inputs used in the manufacture of exempted goods (silver).
2. Applicability of retrospective provisions introduced by the Finance Act, 2010.
3. Calculation methodology for the proportionate Cenvat credit to be reversed.
4. Compliance with procedural requirements under the Finance Act, 2010 for availing benefits.

Detailed Analysis:

1. Reversal of Cenvat Credit Attributable to Inputs Used in the Manufacture of Exempted Goods (Silver):
The respondents are engaged in manufacturing zinc and lead, with silver emerging as a by-product. The Revenue argued that since silver is an exempted product, the Cenvat credit attributable to inputs and input services used in its manufacture should be reversed under Rule 57AD/Rule 6, as applicable. The Original Authority held that the respondents were eligible for the provisions introduced by the Finance Act, 2010, and had reversed the proportionate Cenvat credit based on the weight of the raw material attributable to the silver produced.

2. Applicability of Retrospective Provisions Introduced by the Finance Act, 2010:
The respondents reversed the Cenvat credit attributable to silver during the financial year 2002-2003. The Revenue contended that the respondents applied for the benefit under the Finance Act, 2010, one day after the due date and paid part of the interest after applying to the Commissioner. The Original Authority found that the respondents had fulfilled the requirements of the Finance Act, 2010, by reversing the proportionate credit and paying the interest before applying to the Commissioner.

3. Calculation Methodology for the Proportionate Cenvat Credit to be Reversed:
The Revenue argued that the proportionate Cenvat credit should be calculated based on the value of silver relative to the total value of all products, referencing CAS-4 Standards. However, the Tribunal found no legal basis for this assertion. The Tribunal noted that the legal provisions require the reversal of Cenvat credit attributable to inputs used in the manufacture of exempted goods, and the Board's circular dated 09/05/2008 clarified that this should be based on actual consumption of inputs. The Tribunal upheld the respondents' method of calculating the proportionate credit based on the weight of the raw material.

4. Compliance with Procedural Requirements Under the Finance Act, 2010 for Availing Benefits:
The Tribunal noted that the respondents reversed the proportionate credit in 2002-2003 and paid the interest before applying to the Commissioner in November 2010. The Revenue's contention that there was a one-day delay in filing the application and a delay in paying differential interest was not substantiated with evidence. The Tribunal found that the respondents fulfilled the conditions stipulated in the Finance Act, 2010, and the Original Authority's finding was upheld.

Conclusion:
The Tribunal upheld the Original Authority's order, finding no infirmity in the reversal of proportionate credit by the respondents and dismissing the Revenue's appeal. The Tribunal emphasized that the legal provisions and the Board's circular support the respondents' method of calculating the proportionate credit and that the procedural requirements under the Finance Act, 2010, were met by the respondents.